US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with a strong beat in Jobless Claims and this week with the beat in Job Openings.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- The miss in the ADP report yesterday led to some USD weakness which might continue if the data in the next couple of days misses as well.
- The market doesn’t expect the Fed to hike again at the moment.
UK:
- The BoE kept interest rates unchanged at the last meeting.
- The central bank is leaning more towards keeping interest rates “higher for longer” but it kept a door open for further tightening if inflationary pressures were to be more persistent.
- Key economic data like the latest employment report showed a very high wage growth despite the rising unemployment rate, but the latest UK CPI missed expectations across the board.
- The latest UK PMIs showed further contraction, especially in the Services sector.
- The market doesn’t expect the BoE to hike anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the GBPUSD pair pulled back yesterday into the blue 8 moving average where it’s finding some resistance. From a risk management perspective, the sellers would have a much better risk to reward setup if the price pulled back all the way up to the 1.2398 resistance where we can find the confluence with the trendline, the 38.2% Fibonacci retracement level and the red 21 moving average. The buyers, on the other hand, will need the price to break above the trendline to turn the trend around.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a pullback into the minor trendline around the 1.2180 level where we can also find the Fibonacci retracement levels. The price started to struggle here as the sellers are stepping in with a defined risk above the trendline and positioning for more downside. The buyers will need the price to break above the trendline to pile in with greater conviction and target the resistance around the 1.2308 level.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the market structure on this timeframe is bullish as the price made a new higher high yesterday. The buyers are likely to pile in around the 1.2100 support with a defined risk below it to target a break above the trendline and ultimately the 1.2308 resistance. More conservative buyers may want to wait for the price to take out the trendline first before joining the rally. The sellers, on the other hand, will want to see the price breaking below the 1.2100 support to position for further downside and new lows.
Upcoming Events
Today we have the Jobless Claims report, which continues to show a solid labour market and given the reaction to the miss in the ADP yesterday, we can expect a rally in case of a miss and a drop in case of a beat. Tomorrow, it will be the time for the NFP report which is the only one the Fed will see before its next rate decision.
