US
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The recent US CPI beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains pretty resilient as seen once again last week with the beat inJobless Claims, although continuing claims missed for a second time in a row.
- The US Retail Sales last week beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending is still solid.
- The US PMIs this week showed that the economy now looks more balanced and resilient.
- Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady in November as well.
- The market doesn’t expect the Fed to hike anymore.
UK
- The BoE kept interest rates unchanged at the last meeting.
- The central bank is leaning towards keeping interest rates “higher for longer”, although it kept a door open for further tightening if inflationary pressures were to be more persistent.
- The latest employment report showed a slowdown in wage growth and some job losses in September which could point to a softening labour market.
- The UK CPI last week slightly beat expectations but given the softening in the labour market it’s unlikely to change the BoE’s stance.
- The UK PMIs this week showed further contraction in the services sector.
- 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 probed above the key trendline but got rejected as the UK PMIs disappointed and the US ones surprised. The US Dollar remains in the driver’s seat as the US economy is outperforming its peers and the negative risk sentiment is leading to safe haven flows. The target for the sellers is the 1.1840 level and we should see the bearish momentum picking up as soon as the price breaks the recent lows.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see the selloff from the key trendline with the sellers increasing the bearish bets on the break of the support zone around the 1.2220 level and then on the break of the counter-trendline. The buyers don’t have much to lean onto at the moment, but we might find them around the recent lows as they try to position for a rally back to the 1.23 handle. The sellers remain in control though and we should see them piling in at every rally.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that from a risk management perspective, the sellers have a good resistance zone around the 1.21 handle where we can find the confluence with the trendline, the Fibonacci retracement levels and the red 21 moving average. If the price breaks above the trendline, the buyers should pile in to extend the rally into the 1.2180 level where the sellers will step in again.
Upcoming Events
Todaywe will see the latest US Jobless Claims data with the market likely focusing on the Continuing Claims figures as they’ve missed expectations two times in a row already and might be a signal that the labour market is weakening. Tomorrow, we will get the US PCE report which is unlikely to change anything for the Fed at this point in time.