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 Core PCE came in line with expectations with disinflation continuing steady.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with a strong beat in Jobless Claims.
- The ISM Manufacturing PMI beat expectations yesterday in another sign that the US economy remains resilient.
- 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 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 continues to melt but the selling is becoming overstretched. From a risk management perspective, the sellers would be better off waiting for the price to pull back into the 1.23 resistance where we can find the confluence with the red 21 moving average and the 38.2% Fibonacci retracement level. The buyers, on the other hand, will need the price to break above the trendline to turn the trend around.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg lower is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the downward trendline where the sellers are likely to step in, but an even better level to short from will be the resistance zone around the 1.23 level.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone around the 1.21 level where we can find also the 38.2% Fibonacci retracement level for confluence. That’s where we can expect the sellers to step in again in case of a pullback. The buyers, on the other hand, will want to see the price breaking higher to position for a rally into the trendline around the 1.22 handle and target the 1.23 resistance zone.
Upcoming Events
This week we have many key economic releases that will culminate in the US NFP report on Friday. Today, we will have the US Job Openings data which led to a strong rally the last time as the big miss made Treasury yields to fall due to less labour market tightness and less hawkish Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM Services PMI. On Thursday, we will see the Jobless Claims data, which continues to show a solid labour market. Finally on Friday, it will be the time for the NFP report which is the only one the Fed will see before its next rate decision.
