GBP/USD Fundamental Analysis – week of December 18, 2017

The GBPUSD pair ended the week at the lows of its weekly range and looks weak as it heads to the next week. But overall, the week was marked by some choppy action in the pair as the lack of fundamentals, apart from the BOE rate announcement and statement clearly showed on the markets. We head towards the last 2 weeks of the year and we do not expect any major fireworks in the markets during this period.

GBPUSD In Range

Last week saw the central banks of the US, the UK and the Eurozone come out with their year end statements and conferences and all of these were very much of expected lines. The first was the Fed which hiked the rates by 0.25% as was widely expected and priced into the markets. The traders were more interested in the statement and the speech from Yellen. It showed that a couple of Fed members had dissented on the hike decision and though the growth forecast was higher, the inflation forecasts remained on par. This was viewed as dovish for the future rate hikes in 2018 and this led to a weakening in the dollar which helped the pair to move higher towards 1.35.

Then was the BOE which kept the rates on hold and the monetary policy summary was largely on expected lines. This did not have much of an impact on the pound though the strong retail sales data from the US helped the dollar to gain back its strength. There was no major developments in the Brexit process and to close the week, we were ever so closer to seeing the tax reform bill getting passed in the US. This gave a late boost to the dollar.

Looking ahead at the coming week, apart from the GDP data from the US, there is no further news from the UK or the US as we wind down to the end of the year. As the tax reform bill gets passed, we are likely to see a bout of dollar strength and this could bring in some volatility into the markets but overall, we should see some quiet and consolidative trading in the coming week.