US
- The Fed left interest rates unchanged as expected with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US Core PCE came in line with expectations.
- The labour market is starting to show some weakness as Continuing Claims are now rising at a fast pace and the NFP data last Friday missed across the board.
- The US Consumer Confidence fell for the third consecutive month although the data beat expectations.
- The US ISM Manufacturing PMI last week missed expectations by a big margin, followed later on Friday with a disappointing ISM Services PMI, although the index remained in expansion.
- The market doesn’t expect the Fed to hike anymore.
UK
- The BoE kept interest rates unchanged as expected last week.
- The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
- BoE Governor Bailey repeated that they will keep rates high for long enough to get inflation back to target.
- The latest employment report showed a slowdown in wage growth and some job losses in September which are pointing to a softening labour market.
- The recent UK CPI slightly beat expectations but given the softening in the labour market it’s unlikely to change the BoE’s stance.
- The UK PMIs showed further contraction in the services sector, which accounts for 80% of UK’s economic activity.
- 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 broke out of the key trendline and the resistance around the 1.23 handle but erased most of the gains ever since. The pair was indeed overstretched as the price was too distant form the blue 8 moving average. In such instances, we can generally see a pullback into the moving average or some consolidation before the next move.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a support zone around the 1.2220 level where there’s also the 61.8% Fibonacci retracement level for confluence. If the price gets there, we can expect the buyers to step in with a defined risk below the support to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the previous lows.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we now have a resistance zone around the 1.2308 level where we can find the most recent swing high. A break above this level should give the buyers even more conviction for a rally into new highs.
Upcoming Events
Today we have the US Jobless Claims on the agenda while tomorrow it will be the time for the University of Michigan Consumer Sentiment report. The market is likely to focus on the US Jobless Claims given the recent weakness in the labour market data. Strong readings are likely to support the USD, while weak figures should keep on weighing on the greenback in the short-term.
