GBP/USD Fundamental Analysis – week of February 20, 2017
The pound continued to trade and consolidate within a tight range for the second week running as neither the strength in the dollar during the early part of the week nor the weakness in the dollar in the latter part did much to change the GBP/USD price by very much. With both US and UK undergoing a period of uncertainty with the US under the new Trump administration on one hand and the UK with the Brexit process on the other hand, this pair has been caught in a kind of a stalemate which has pushed the pair to trade within a 400-500 pip range for the past few weeks.
Last week, we saw the CPI data and the average earnings data from the UK coming in weak but it was compensated by the claimant count change data which came in very strong. So, as far as the pound was concerned, the economic data has been either good or fairly balanced over the past few weeks and this is one of the major reasons why the pound has not fallen off over the last few weeks despite all the uncertainty and risks surrounding the Brexit process. In the US, we saw Yellen making a speech on monetary policy where she chose to toe the middle line but at the same time, not ruling out the possibility of a rate hike as early as March. Though this was dollar positive, we also saw the release of CPI data which showed the average wages component continuing to be weak which was a big blow for the dollar bulls but the GBP/USD was not impacted much and it closed the week just above 1.2400.
Looking ahead to the coming week, the economic calendar is pretty clear with just the UK GDP to be released but we are going to see the upper house of the UK Parliament debate the Article 50 and once it is invoked, there is no going back as far as the Brexit process is concerned. Though the debate as such is unlikely to throw up anything new, we can expect some volatility based on its passage through the Parliament.