USD
- The Fed left interest rates unchanged as expected with a shift in the statement that indicated the end of the tightening cycle.
- The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
- Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long, which implies a rate cut coming soon.
- The US CPI this week came in line with expectations with the disinflationary progress continuing steady. This was also confirmed by the US PPI the day after where the data missed estimates.
- The labour market has been showing signs of weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming in strongly.
- The latest ISM Manufacturing PMI missed expectations falling further into contraction, while the ISM Services PMI beat forecasts holding on in expansion.
- The market expects the Fed to start cutting rates in Q1 2024.
GBP
- The BoE left interest rates unchanged as expected with no dovish language as they reaffirmed that they will keep rates high for sufficiently long to return to the 2% target.
- Governor Bailey pushed back against rate cuts expectations as he said that they cannot say if interest rates have peaked.
- The latest employment report missed forecasts with wage growth coming in much lower than expected and job losses in November.
- The recent UK CPI missed expectations across the board, which was a welcome development for the BoE.
- The UK PMIs beat expectations on both the Manufacturing and Services measures, with the Services sector crawling back in expansion.
- The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
- The market expects the BoE to start cutting rates in Q2 2024
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD yesterday broke above the resistance as the BoE kept its hawkish language in stark divergence with the Fed which turned more dovish the day before. We can also notice that this latest leg higher is diverging with the MACD right when it’s breaking out. This is generally a sign of weakening momentum often followed by pullbacks or reversals.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price got a bit overstretched to the upside as depicted by the distance from 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. The buyers are likely to lean on the broken resistance and the 61.8% Fibonacci retracement level to position for another rally. The sellers, on the other hand, will want to see the price breaking lower to position for a drop back into the 1.26 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action with the pair consolidating near the broken resistance zone that now will act as support. We can also see that the buyers have the red 21 moving average for confluence right at the support zone. What happens around this zone will likely determine where the pair will go in the next few weeks.
Upcoming Events
Today the only notable events on the agenda will be the UK and the US PMIs.
