GBP/USD has been fully capitalising on the weakness of the dollar over the past couple of days and has easily managed to recover all the losses that it had suffered during the beginning of the week. But the point to note here, something that we have been mentioning in our past few forecasts, is the fact that the pair is caught within a large range and is likely to keep bouncing and correcting within the range in the short term. As part of that, the pair has bounced now but we believe that this rally will be soon sold into and then the pair will be back again in the bottom of the range.
Yesterday, the dollar could not post any gains despite some strong data in the form of the manufacturing index. Trump also did not touch upon the economic or fiscal policy in his speech and so the door was ajar for the dollar bulls to push through but they failed to do that and allowed the bears to continue to control the dollar. This is surprising to see, especially in the context that the US has seen ever improving data over the past few weeks and also the Fed adding to the bullishness with its comments on rate hikes. But the bulls are still apprehensive of taking control and the GBPUSD pair has taken full advantage of that, something which is has managed to do over the last few weeks when it has been the strongest pair even during times of dollar strength. This consolidation within the larger range is set to continue today as well.
Looking ahead to today, we have the retail sales data from the UK which is likely to come in strong and support the pound even further. This should continue the trend of improving data from the UK which we have been seeing over the last few months despite the ongoing Brexit preparations.