USD

  • The Fed left interest rates unchanged as expected at the last meeting 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.
  • The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
  • The labour market continues to soften but remains resilient with US Jobless Claims beating expectations week after week.
  • The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
  • The US Retail Sales beat expectations across the board.
  • The Fed members recently have been pushing back on the aggressive rate cuts expectations.
  • The market expectation for a rate cut in March fell to roughly 50%.

GBP

  • The BoE left interest rates unchanged as expected at the last meeting 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 state if interest rates have peaked.
  • The employment report showed job losses in December and lower than expected wage growth.
  • The UK CPI beat expectations across the board, which is going to reinforce the BoE’s neutral stance.
  • The UK PMIs showed the Manufacturing sector falling further into 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 Q2.

GBPUSD Technical Analysis – Daily Timeframe

GBPUSD Technical Analysis
GBPUSD Daily

On the daily chart, we can see that GBPUSD fell from the resistance zone around the 1.28 handle following weaker UK data and strong US figures and bounced on the key support around the 1.26 handle after the hot UK CPI report. The price is now right in the middle of the range, so there’s not much more to glean from this timeframe and we need to zoom in for further details.

GBPUSD Technical Analysis – 4 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 4 hour

On the 4 hour chart, we can see that the moving averages crossed to the upside and the price broke above the red 21 moving average. This should be a signal that the bullish momentum is prevailing and there are higher chances of seeing an extension into the resistance zone. The buyers are likely to lean on the trendline where they will also find the 21 moving average for confluence. The sellers, on the other hand, will want to see the price breaking below the trendline to position for a drop back into the support and target a break below it.

GBPUSD Technical Analysis – 1 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 1 hour

On the 1 hour chart, we can see more closely the current price action and the bullish setup with the Fibonacci retracement levels adding extra confluence. This gives us two possible scenarios:

  • The buyers will likely lean on the trendline expecting a bounce and target the resistance around the 1.28 handle.
  • The sellers will wait until the price breaks below the trendline to pile in and target the 1.26 support.

Upcoming Events

Today, the only notable events will be the UK Retail Sales and the University of Michigan Consumer Sentiment survey.