GBP/USD Fundamental Analysis – week of April 10, 2017
GBPUSD spent most of the week within a tight range between 1.24 and 1.25 and we had mentioned in our daily forecasts that this is likely to be the range for the next few days and thats what had happened. We had also mentioned that even if the pair was to break through the highs of the range at around 1.25 region, there was a very strong resistance around the 1.26 region and so there was not much for the bulls to look forward to.
GBP/USD Continues to Weaken
The pair did try and make a break through 1.25 and it succeeded for a brief while though the bulls could not make much progress after that. It began to slide down towards the close of the week as the dollar gained in strength. The ADP employment report came in much stronger than expected and this helped to buoy the USD and place the GBPUSD under pressure which then promptly cae back through 1.25. The NFP employment report from the US came in very weak but it did not have much of an impact on the dollar as the unemployment rate dropped to a greater extent than what was expected.
What did rock the markets was the US attack on a Syrian airbase and with the US finally and officially joining the Syrian war, it increased the global fears and risks that the war was likely to take a much larger scale and this led to a flight to safety for the funds. Though this issue directly involved the US as well, it did indirectly help the dollar to gain in strength as some of the funds were moved out of stocks and invested into the dollar. This event also showed the Trump was likely to be more decisive in his foreign policy and helped the investors to believe in him a little more. Towards the end of the week, the GBP/USD pair dropped through 1.24 as a result of this and it ends the week below there.
Looking ahead to the coming week, we have the Retail Sales, PPI and CPI data from the US and we also have Yellen making a speech. We expect the GBP/USD pair to continue to trade within a tight range in the near future with the dollar continuing to be steady and with the Brexit process still unclear atleast until the negotiations between the Euro and the UK leaders begin.