US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- The US PMIs missed expectations across the board last week, while the US Jobless Claims remained solid.
- Fed Chair Powell’s speech at the Jackson Hole Symposium was mostly in line with what he said previously but he stressed on the need to be careful going forward and that continued strength in the labour market may require further rate hikes.
- The first half of the week saw US Job Openings and Consumer Confidence reports missing expectations by a big margin, followed by a miss in the US ADP data and a beat in the US Jobless Claims.
- The market doesn’t expect another hike from the Fed anymore, but a lot will depend on the data going forward.
UK:
- The BoE hiked by 25 bps as expected.
- The central bank seems to be leaning more on the less hawkish side as a key line in the statement was tweaked to indicate the propensity for a “higher for longer” stance rather than keeping with additional rate hikes.
- Recent key economic data like the latest employment report showed even more wage growth despite the unemployment rate ticking higher again, and the UK CPI beat expectations pointing to stagflation.
- The UK PMIs missed expectations across the board with the Services sector plunging into contraction.
- The market expects the BoE to hike by 25 bps in September.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD is bottoming out at a key support around the 1.2593 level. The sellers keep leaning on the red 21 moving average to position for a downside breakout, but the buyers are resisting. If the price breaks above the 21 moving average, then the bias would switch from bearish to bullish and the buyers will have more control. On the other hand, a break below the support would open the door for a fall into the 1.2310 level.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the sellers recently stepped in around the daily 21 moving average and the last lower high at the 1.2733 level. In fact, if the price breaks above the lower high it would turn the bearish structure into a bullish one and lead to more higher highs. Right now, we can see that the price is testing the red 21 moving average as the market awaits the US NFP report today. Going forward the 1.2733 level and the 1.2593 support will be key to determine the next direction.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a good support around the 1.2655 level as we have also the confluence with the 50% Fibonacci retracement level and the 4-hour 21 moving average. This is where we can expect the buyers to step in with a defined risk below the level to target new higher highs (although at this point it might be better to wait for the NFP report). The sellers, on the other hand, will want to see the price breaking lower to position for a downside breakout of the key 1.2593 support.
Upcoming Events
Today the market will be focused on the main release of the week: the US NFP report. We will also have the US ISM Manufacturing PMI an hour and a half later, but the labour market data is the priority right now. A bad reading is likely to weaken the US Dollar in the short term, but if the data is really bad, the market may start to fear the recession and the greenback should come back soon after. A good reading is likely to be linked with the soft-landing scenario and might be bearish for the USD as well. Overall, it’s a mixed picture at the moment as the Fed is expected to pause at the September meeting and we might get much worse economic data before the next meeting in November.
