The pound turned out to be one of the strongest currencies in the market yesterday as the GBPUSD pair made full use of the weakness in the dollar to bounce by over 100 pips during the course of trading yesterday. It continues to trade in a strong manner comfortably above the 1.3150 region as of this writing and it looks as though this strength would continue in the medium term.
GBPUSD Moves Higher
We had warned of this bounce in our forecast yesterday where we had said that the pair was likely to move higher from the strong support region of 1.3060 where it had been consolidating for the past couple of days. The pair had fallen by around 2 cents ever since the BOE hiked rates but presented a grim picture of the UK economy and the impact of the Brexit process on the UK economy. But since that time, there have been some comments from some of the BOE members supporting further rate hikes.
The statement from the BOE had led to a belief that there would not be many rate hikes down the road and that there could probably be only one more rate hike for the next year or so and this has led the pound lower. But the fact that some members of the BOE continue to have a favorable view of the economy and continue to believe that the rate hikes could be quicker has led the pound higher so far. We will have to wait and see how the situation pans out in the coming days.
Looking ahead to the rest of the day, we do not have any major economic news from either the UK or the US for the rest of the day and hence we can expect some steady consolidation in the GBPUSD pair for the rest of the day. The dollar is expected to hold steady over the short term and the moves in this pair are likely to be driven more by the pound than by the dollar in the coming days.
This article was originally posted on FX Empire