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.
- The US economic data keeps on surprising to the upside, but 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 and brought down Treasury yields weakening the US Dollar, but the US Jobless Claims came out better than expected once again and supported the USD.
- At the moment, the market doesn’t expect another hike from the Fed, but the next NFP and CPI data will be crucial to confirm or change this view.
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 25 bps hike in September now looks much less certain.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD eventually broke through the key support zone around the 1.2593 level as the sellers leant on the red 21 moving average and increased the selling pressure as the UK PMIs missed expectations by a big margin. This breakout opened the door for much lower prices with the first target coming at 1.2310.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a range between the 1.2593 support and 1.2800 resistance. As expected, the sellers piled in around the resistance with a defined risk above the level and positioned for a break below the support. Now, we should see more sellers coming into the market at every pullback and the first one may happen on a retest of the broken support now turned resistance.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have some good confluence around the broken support where the sellers can step in. In fact, we can find the previous swing low level, the red 21 moving average and the 38.2% Fibonacci retracement level. The buyers will need the price to break above this strong zone to invalidate the bearish setup and position for another rally into the resistance.
Upcoming Events
Today the only major event is Fed Chair Powell’s speech at the Jackson Hole Symposium. The expectations though are for him to take a “wait and see” approach as we have more key economic data ahead before the next FOMC meeting.