USD
- The Fed left interest rates unchanged as expected at the last meeting 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 latest US Core PCE came in line with forecasts with the disinflationary progress continuing steady.
- The labour market has been showing signs of weakening lately but last week we got some strong releases 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 University of Michigan Consumer Sentiment survey came in much better than expected with inflation expectations tumbling.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates in Q2 2024.
GBP
- The BoE kept interest rates unchanged as expected at the last meeting.
- The central bank is leaning towards keeping interest rates high for longer, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
- The BoE members continue to repeat that they will keep rates high for long enough to get inflation back to target.
- The latest employment report beat expectations with wage growth remaining at elevated levels.
- 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 broke out of the recent range to the downside. The price bounced around the red 21 moving average and it’s now coming back to the broken support now turned resistance. This might end up in a classic “break and retest” pattern, so the sellers are likely to step in around the resistance with a defined risk above it to position for a drop into the 1.2374 level.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been diverging with the MACD for a long time. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the breakout of the range to the downside might have been a confirmation of a reversal with the targets standing around the swing lows at 1.2374 and 1.2190. The buyers will want to see the price getting back above the resistance to invalidate the bearish setup and position for a rally into the 1.2750 level.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action with the pair approaching the key resistance zone ahead of the UK employment report at the top of the hour. What happens around this resistance will likely determine where the pair will go in the next few weeks. A break to the upside should lead to a rally back into the 1.2750 resistance, while a rejection is likely to be followed by a drop into the 1.2374 level first, and upon a further break lower, the 1.2190 level.
Upcoming Events
This week is going to be a big one with the US CPI and the FOMC and BoE rate decisions on the agenda. We begin today with the UK Labour Market report, while later in the day we get the release of the US CPI report where the market will want to see how the disinflationary trend is going. Tomorrow, we have the US PPI data followed by the FOMC rate decision where the Fed is expected to keep interest rates unchanged. On Thursday, we have the BoE rate decision where the central bank is expected to keep rates unchanged, while later in the day will see the US Retail Sales and Jobless Claims figures. On Friday, we conclude the week with the UK and the US PMIs.
