Fundamental Overview
The USD rallied across the board yesterday after a slate of strong US data. The focus was mainly on Jobless Claims which beat expectations by a big margin with Initial Claims falling to the lowest level since July and Continuing Claims improving further. This triggered a hawkish repricing in interest rates expectations with the market now seeing 39 bps of easing by year-end vs 44 bps previously and 101 bps by the end of 2026 vs 113 prior.
Fed speakers this week haven’t offered anything new and just reiterated that the labour market weakness “forced” them to move towards neutral. This means that if we continue to get stronger labour market data, the Fed could start turning more hawkish again and we might not get another cut in October or December. Therefore, there’s still plenty of room for the US dollar to appreciate as the market’s pricing remains too dovish.
On the GBP side, the BoE left interest rates unchanged at the last meeting but slowed the pace of QT. The forward guidance was mostly the same with the focus being more on the inflation side now. The UK continues to have a serious inflation problem with high core CPI, high wages and rising consumer inflation expectations. The market is pricing just 5 bps of easing by year-end and 36 bps by the end of 2026.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD dropped into the key swing level at 1.3334. This is where the buyers stepped in with a defined risk below the level to position for a rally back into the 1.3588 resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 1.3140 level next.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we now have a downward trendline defining the bearish momentum. In case we get a pullback into the trendline, we can expect the sellers to lean on it with a defined risk above it to position for a drop into new lows. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the 1.3588 level next.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the sellers will have a better risk to reward setup around the trendline, while the buyers will likely continue to step in around the swing level. A break below the 1.3334 level should open the door for new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PCE and the final University of Michigan Consumer Sentiment report.
