GBP/USD sideways around 1.25 after impressive 2017 recovery before key data

Currently, GBP/USD is trading at 1.2520, down -0.02% on the day, having posted a daily high at 1.2532 and low at 1.2518.

Dollar king flexing muscles ahead of key US events/data this week - ANZ

GBP/USD has been a strong contender in 2017, rallying from below the 1.20 handle by 700 or so pips and despite Brexit risks. The UK economy has been a surprise to the sceptics and indeed the BoE has been a great deal more neutral that anticipated with even some hawkishness coming through from Forbes. 

Indeed Carney also gave a positive spin on the economy earlier in the month when he said, "The thing that we missed is the strength of consumer spending and consumer confidence associated with that, that has been present all the way through this process," he told a news conference, adding, "Consumers have not been affected by any of the associated uncertainty around Brexit." However, more recently he said, "Last week the central bank signalled it was in no rush to hike rates, with BoE Governor Mark Carney stressing that Britain's economy would face "twists and turns" during its departure from the European Union."

Hawkish MPC members supporting GBP

Sterling caught a bid on the back of MPC member, Forbes when she said, "In my view, if the economy remains solid and the pick-up in the nominal data continues, this could soon suggest an increase in Bank Rate."

Key UK data in view

We now get the UK CPI data and jobs figures mid week. "The press was gloomy about public finances and about further job cuts in the financial sector," explaine dKit Juckes, economist at Societe Generale, adding, "The pound failed to get a lift from very strong data on Friday and may react more to bad news (or it may just not react to anything until the economic fog has lifted). Above GBP/USD 1.25, we'd rather be short than long."

Eyes on Yellen

However, the highlight of the week in the US will be Fed Chair Janet Yellen's semi-annual testimony to lawmakers and Juckes explained that with inflation edging up and the labour market tightening slowly, a very dovish discourse seems unlikely. "I can't see her helping bond bulls much, and at the margin, she's more likely to be dollar-friendly than anything. Though to be fair, a damp squib isn't impossible."

GBP/USD levels

GBP a top performer of late, but why? - Scotiabank

The hourly FXStreet OB/OS Index is showing neutral conditions, alongside the FXStreet Trend Index which is slightly bullish. Meanwhile, analysts at Commerzbank explained that they suspect that prices will need to go sub 1.2250 in order to alleviate immediate upside pressure and trigger losses to the 1.1988/80 recent low. "Above 1.2700 would allow for further strength to the 1.2776 December high. Between here and 1.2836 lies several Fibonacci retracements and major resistance and we suspect that it will struggle here."