GBP/USD Fundamental Analysis – week of October 23, 2017

Like the euro, the pound also spent much of the week in a consolidation manner and at the end of the week, it had gone nowhere. This has been the case with many other currencies against the dollar which has managed to hold its own despite the incoming data from the US being choppy. This kind of data is likely to make it a difficult decision for a December rate hike from the Fed but the market still believes that it is within the realms of possibility and that it only needs one month of good data for the rate hike to happen.

GBPUSD In Consolidate Mode

The week began with the UK PM May sending out a strong signal by making her presence felt at the Brexit meeting in Brussels. Though the meetings between the UK and the Eurozone leaders have been going on for many weeks now, there has not been much progress and the talks have reached a point of stalemate. The situation has become so dire that there is even talk of the UK walking out of the talks with no deal and many people have been calling out for their leaders to do that. It was necessary for May to send out a message that she was ready to do the hard yards and though there still has not been much progress despite her presence, it increasingly looks as though some kind of a deal might be hammered out in the coming weeks and months.

This helped to keep the pound buoyant though it did suffer a bit under the pressure from the dollar. The data from the UK also turned out to be choppy with the inflation data coming in as per expectations. The data does not see any fundamental change as far as the UK is concerned and this should be some relief for the pound bulls. The dollar held steady and also gained a bit towards the end of the week on the news of passage of the tax reform bill by Trump and his team and this augurs well for the future of the US economy and hence the dollar.

Looking ahead to the coming week, we have the advance GDP data from the US and also the UK as well and these 2 pieces of data should bring in a bit of volatility in the GBPUSD pair. We are also likely to see some month end flows and positioning ahead of the new month and this should also have a bearing on the prices of the pound, especially around the London fix time on a daily basis.