GBP/USD Fundamental Analysis – week of October 30, 2017

The GBPUSD pair had a very choppy week but at the end of the week, it finished near the lows of its range as the weakness in the euro had an indirect effect on the pound as well and the dollar also gained strength across the board which also placed the pound under pressure during the week. We believe that more pain may be in store in the upcoming weeks as the dollar is likely to gain further strength.

GBPUSD Under Huge Pressure from Dollar

The week began quietly for the pound as the investors and traders seemed to be confident of the UK economy and with the incoming data like the GBP also coming in better than expected from the UK, the pound began to make its journey higher during the first half of the week. The second half of the week was dominated by the ECB announcement extending the QE through atleast September 2018 and this pushed the euro lower and also strengthen the dollar a bit as well.

On the other hand, the dollar was helped by some strong incoming data of its own, in the form of advance GDP and this combined with the news that John Taylor could be the next Fed Chair increased the hopes for a quick rate hike from the Fed in December. Taylor is know to be a hawk and he is believed to support quick rate hikes and this could be a large boost to the dollar which could then fuel the downtrend that we are seeing, even further.

Looking ahead to the coming week, we are likely to see a lot of month end flows which generally affect the pound and make the price action pretty choppy towards the end of the month. We then have all the action in the US which a range of data including the employment and wages report and other data from the US that will be released towards the end of the week. This is the final set of these data before December and hence we believe that if these data come in strong, then it would more or less confirm the rate hike from the Fed and this is likely to push GBPUSD towards 1.30 and below.