GBP/USD Fundamental Analysis – week of February 19, 2018

It was a volatile week for the GBPUSD pair with it moving higher and lower in an alternating manner for much of the week before settling down just above the support region to close the week. We had mentioned that the region around 1.4 would likely be a very strong region of resistance and support and now we find the prices exactly in that region which should make the price action in the coming week, an interesting one.

GBPUSD Has a Volatile Week

The dollar strength was the focus in the previous week and with a slew of data from the US and the UK, it was obvious that the volatility would be high. While we have the inflation data and the retail sales data from the US, we also had the retail sales data being released from the UK as well. The data from the US was a mixed one where the retail sales data came in weaker than expected while the inflation data came in stronger than expected. This reduced the expectations of the market for accelerated rate hikes from the Fed in the coming months and led to a sell off of the dollar.

This was a boon for the bulls in the pound who had been battered for much of the previous week as the pound had fallen to 1.38 in what was seen as a big reversal of its fortunes since the beginning of the year. Just when it appeared as though the pound would topple over, the dollar weakness served to help it and it was able to climb back above the 1.40 region. The UK also followed a similar pattern as far as economic data was concerned with weaker retail sales and stronger inflation and after a brief trip above the 1.41 region, we saw the pair come under pressure from the dollar towards the end of the week.

Looking ahead to the coming week, the pound is likely to be the focus with a speech from the BOE Governor Carney, GDP data, inflation reports hearings and average earnings data being the key. On the other hand, we have the FOMC meeting minutes from the US that would be released towards the middle of the coming week and a combination of all these would mean that we are likely to see a lot of volatility in the coming week with the 1.40 region being the key once again. If we stay above, we are bullish for the short and medium term while if we move below that, we are going to be bearish.