GBP/USD heads for first weekly loss since early December

• Pound consolidates weekly losses across the board.  
• Greenback posts mix results on Friday after data, ends week on a soft note after the FOMC meeting.  
• Cable drops after rising during six weekly gains in-a-row.  

The GBP/USD pair failed to hold on top of 1.3100 and pulled back during the second half of Friday’s American session to the 1.3070 area. Cable is about to end the week 120 pips lower from the level it had a week ago.  

Among the most traded currencies, the pound was the worst performers over the week. The Brexit uncertainty continues to be a key driver. “The drop in the value of GBP over the past week suggests that investors have become a little more wary about Brexit risks. That said, the year to date gains in the value of the pound suggest that the market is betting that a hard Brexit is still likely to be avoided”, wrote Rabobank analysts.  

Regarding the US dollar, on Wednesday the Federal Reserve confirmed a change to a more dovish stance and weakened the greenback. Despite the soft tone around the dollar, GBP/USD did not rally and bottomed on Friday at 1.3042, the lowest in a week.  

The pair is offering signals that it peaked last Friday at 1.3215, the highest level in three months. From a fundamental perspective, some clarity regarding Brexit or a much weaker US Dollar appears to be needed to push GBP/USD above 1.3200/1.3300.  

Week ahead  

In the UK, the focus will continue to be on Brexit negotiations as PM Theresa May deals for concessions from the European Union. Another interesting event will be the Bank of England meeting.  “We do not expect the Bank of England to change its policy on Thursday. It is ‘Super Thursday’ so we also get an updated Inflation Report including updated projections. It seems likely the growth and inflation paths will be revised down. A couple of weeks ago we changed our BoE call and now expect the next hike to arrive in November  instead of May“, said Danske Bank analysts.  

In the US economic data to be released includes information with data postponed due to the government shutdown. Also, reports from the service sector are due. After Wednesday’s meeting, the speeches from Fed’s officials will be relevant to follow.