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 US CPI last week 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 fairly solid as seen once again last week with the beat in Jobless Claims, although continuing claims surprisingly missed.
- The US PMIs recently showed that the US economy remains pretty resilient.
- The University of Michigan Consumer Sentiment report last Friday missed across the board with the inflation expectations figures spiking back up.
- The US Retail Sales this week beat expectations by a big margin with positive revisions to the prior figures.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and will likely pause 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 more 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 yesterday slightly beat expectations but given the softening in the labour market it’s unlikely to change the BoE’s stance.
- The latest UK PMIs showed further contraction, especially 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 rejected the key resistance around the 1.2310 level where we had also the 38.2% Fibonacci retracement level and the trendline for confluence. The slight beat in the UK CPI hasn’t led to a rally in the pound as the market doesn’t see it as game-changing. The bearish bias remains intact as the UK labour market is starting to weaken while the US jobs data continues to surprise to the upside.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair broke out of the range between the 1.2120 support and the 1.2220 resistance. This remains a sellers’ market, so the buyers should wait for some key upside breakout. The sellers, on the other hand, should step in at every pullback and target a break below the previous lows.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the recent breakout with the price rejecting the red 21 moving average before making new lows. The bearish momentum looks to be strong but the sellers will have a much better risk to reward setup if the price pulls back into the broken support turned resistance where we can find the trendline and the red 21 moving average for confluence. The buyers, on the other hand, will want to see the price breaking above the trendline and the resistance to invalidate the bearish setup and start targeting the resistance around the 1.2220 level.
Upcoming Events
Today we will get the latest US Jobless Claims report and the market will want to see if the miss in Continuing Claims last week was just a blip or the start of a trend. Later in the day, we will also hear from Fed Chair Powell where the market will be focused on any hint about the near-term policy outlook. Tomorrow, we will also see the latest UK Retail Sales data.
