US:
- The Fed left interest rates unchanged as expected.
- 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 CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
UK:
- The BoE kept interest rates unchanged.
- 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 since the 1.27 handle, the GBPUSD pair just kept on melting with very shallow pullbacks along the way. The recent break of the swing level at 1.23 opened the door for a fall into the 1.18 handle, which is the next strong support. The price at the moment is a bit overstretched though as depicted by the distance from the blue 8 moving average. In such instances, we can generally see the price pulling back into the moving average or consolidate a bit before the next impulse.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that if we were to get a pullback, there’s a good resistance around the 1.23 handle where we have the confluence with the trendline, the 38.2% Fibonacci retracement level and the daily blue 8 moving average. This is where we can expect the sellers to pile in with a defined risk above the resistance to target the 1.18 handle. The buyers, on the other hand, will want to see the price breaking above the resistance to invalidate the bearish setup and position for a rally into the major trendline around the 1.2450 level.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. From a risk management perspective, the sellers would have a much better risk to reward trade if the price pulled back into the 1.23 handle. This scenario is likely to happen only if the price breaks above the minor trendline and the 1.2220 level. Otherwise, we might see bearish impulses from the minor trendline onwards.
Upcoming Events
Today we will see the latest US Consumer Confidence report which surprised to the downside the last time and weighed on the USD in the short term as Treasury yields fell. On Thursday, we will have another US Jobless Claims data which keeps on showing strength in the labour market maintaining the hawkish pricing in interest rates expectations. Finally, on Friday, we will get the latest US PCE data.