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 broke above the resistance but nonetheless the sellers managed to cap the gains as the pair started to consolidate between the blue 8 moving average and the 1.2612 level. There’s not much else to see here, so we need to zoom in to get some more clarity.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been compressing around the 1.2612 level and the price action formed what looks like an ascending triangle. The price can break on either side of the pattern but what follows next is generally a strong and sustained move in the direction of the breakout. Therefore, the buyers will want to see the price breaking higher to position for a rally into the 1.28 resistance. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the lows.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent price action with the pair ranging between the 1.2612 support and the 1.2642 resistance. We can notice that the price has already broken the triangle to the downside, but we will need also a break below the support zone to confirm the breakout. Watch out for the data today as it will add extra confirmation for a breakout on either side.
Upcoming Events
Today we have the UK jobs data in the morning and later in the day the main event of the week, that is, the US CPI report. Tomorrow, we will see the UK CPI report while on Thursday it will be the time for the latest US Jobless Claims figures and the US Retail Sales. Finally, on Friday, we conclude the week with the UK Retail Sales in the morning and the later in the day, the US PPI data and the University of Michigan Consumer Sentiment survey.
