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 US GDP beat expectations by a big margin.
  • The US PCE came mostly in line with expectations and the Core 3-month and 6-month annualised rates are now below the Fed’s 2% target.
  • The labour market continues to soften but remains resilient with US Jobless Claims missing expectations last week but hovering around cycle lows.
  • The latest US PMIs beat expectations by a big margin for both the Manufacturing and Services measures.
  • The US Retail Sales beat expectations across the board.
  • The University of Michigan Consumer Sentiment report jumped to the highest levels since 2021.
  • The Fed members recently have been pushing back on the aggressive rate cuts expectations.
  • The market sees a 50/50 chance of a rate cut in March.

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.
  • The latest 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 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 May.

GBPUSD Technical Analysis – Daily Timeframe

GBPUSD Technical Analysis
GBPUSD Daily

On the daily chart, we can see that GBPUSD bounced on the key support around the 1.2610 level and rallied into the resistance around the 1.2800 handle before consolidating again. There’s not much to glean from this timeframe as the price trades right in the middle of the range, so we need to zoom in to see some more details.

GBPUSD Technical Analysis – 4 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 4 hour

On the 4 hour chart, we can see that the price broke through the upward trendline yesterday but bounced back strongly following the lower than expected US Treasury quarterly refunding estimate. The sellers though leant on the red 21 moving average and the pair this morning fell again below the trendline. The target should be the support zone around the 1.26 handle with a further breakout likely leading to a drop into the 1.25 level.

GBPUSD Technical Analysis – 1 hour Timeframe

GBPUSD Technical Analysis
GBPUSD 1 hour

On the 1 hour chart, we can see that besides the 4-hour 21 moving average, the sellers had also the previous swing high for confluence. If the price were to reverse and rally again, the sellers will likely lean on the downward trendline while the buyers will want to see the price breaking higher to increase the bullish bets into the resistance zone.

Upcoming Events

This week is going to be a really busy one with the FOMC rate decision and lots of economic data on the agenda. We begin today with the US Job Openings and the US Consumer Confidence reports. Tomorrow we will see the US Employment Cost Index and the ADP data before the FOMC rate decision later in the day. On Thursday, we have the BoE rate decision and later in the day the latest US Jobless Claims figures and the ISM Manufacturing PMI. Finally, on Friday, we conclude the week with the US NFP report.