US:
- The Fed left interest rates unchanged as expected.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US CPI came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid as seen also yesterday with the strong beat in Jobless Claims.
- The market doesn’t expect the Fed to hike again at the moment.
UK:
- The BoE kept interest rates unchanged.
- The central bank is leaning more towards keeping interest rates “higher for longer” but it kept a door open for further tightening if inflationary pressures were to be more persistent.
- Key economic data like the latest employment report showed a very high wage growth despite the rising unemployment rate, but the latest UK CPI missed expectations across the board.
- The UK PMIs last month missed expectations across the board with the Services sector plunging into contraction.
- The market doesn’t expect the BoE to hike anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD has eventually breached the key 1.23 level, and this has opened the door for a fall into the 1.18 handle. The price now looks overstretched although fundamentally there’s nothing left to sustain the GBP. From a risk management perspective, the sellers would have a better risk to reward setup if the price pulled back all the way up to the downward trendline where we can also find the red 21 moving average for confluence. Such a big rally though is hard to envision at the moment.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been respecting the minor downward trendline with the last selloff coming off of the trendline following the more hawkish than expected FOMC dot plot. If we get a pullback, the sellers are likely to lean on the minor trendline again where we can also find the confluence with the red 21 moving average and the Fibonacci retracement levels. The buyers, on the other hand, are likely to step in here with a defined risk below the low to position for a rally and increase the bullish momentum if the price breaks above the minor trendline.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup with the key support at 1.2308 now turned resistance and the trendline. The sellers are likely to remain in control and pile in on every pullback. The buyers, on the other hand, are likely to pile in at every breakout.
Upcoming Events
Today we have the UK Retail Sales and the Flash PMIs for both the UK and the US.