USD
- The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
- The latest US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
- The US NFP report beat expectations across the board by a big margin.
- The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
- The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
- The market now expects the first rate cut in May.
GBP
- The BoE left interest rates unchanged as expected at the last meeting removing the tightening bias but reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
- The latest employment report showed job losses in December and lower than expected wage growth.
- The UK CPI beat expectations across the board, which gives the BoE a reason to remain patient.
- The latest UK PMIs showed the Manufacturing sector improving but remaining in contraction while the Services sector continues to expand.
- 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 June.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD broke out of the range following the strong US NFP report and pulled back to retest the support now turned resistance around the 1.2612 level. The price was overstretched after the quick selloff 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. Here we got a pullback into the moving average, and we can now expect the sellers to step in with a defined risk above it to target a break below the 1.25 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we got a reaction yesterday as the price sold off into the 1.2570 level but eventually rebounded back into the resistance zone. The buyers will want to see the price breaking above the recent high at 1.2642 to invalidate the bearish setup and position for a rally back into the top of the range around the 1.28 handle.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the pair now consolidating right around the resistance zone. If the price were to break below the minor support at 1.2605, we can expect the sellers to pile in to increase the bearish bets into the 1.25 support. Conversely, a break above the 1.2642 level should lead to a rally into new highs with the buyers increasing the bullish bets into the 1.28 handle.