GBP/USD Daily Fundamental Forecast – January 16, 2018

The pound had a slightly bullish day yesterday as the combination of a lack of fundamental drivers in the market and the bank holiday in the US seemed to have lulled the pound bulls into a sense of complacency. This could be one of the reasons why the pair has been lounging about for the past couple of days and has not been able to break through the 1.38 region despite the weakness in the dollar.

Pound Awaits Data

It could also be due to the fact that there is much larger news ahead during the course of the week, from the UK, in the form of inflation data and the retail sales data as well and the traders and investors would like to see how the incoming data is, before committing themselves to any specific direction. The incoming data of late, from the UK, has been pretty choppy with some data coming in strong while others coming in weak and this has led to doubts on whether the Brexit process is beginning to take its toll on the UK economy.

But the pound has managed to piggy back on the euro strength and the dollar weakness so far but this may not last long and it is important for the pound to start building its own strength so that it can move higher irrespective of the strength or the weakness in the dollar. Also, there has been talk of rate hikes from the UK but after the one from the BOE last year, the next couple are more important and the BOE needs to ensure that they follow up on their action from last year bolster the UK economy and the confidence of the investors.

Looking ahead to the rest of the day, we do not have any major data from the US but the US traders are expected to be back at their desks after the long weekend. We also have the crucial inflation data from the UK later in the day and that should help to determine the short term direction for the GBPUSD pair.