US:
- The Fed left interest rates unchanged as expected at the last meeting.
- 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.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market remains fairly solid as seen last week with another strong beat in Jobless Claims and the NFP report.
- The ISM Manufacturing PMI beat expectations while the ISM Services PMI came in line with forecasts in another sign that the US economy remains resilient.
- 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” 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 giving the BoE a bit of relief.
- The latest UK PMIs showed further contraction, especially in the Services sector.
- The majority of the BoE members are leaning towards keeping rates higher for longer now.
- 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 eventually bounced near the 1.20 handle and it’s now approaching a key resistance zone. In fact, we can see that around the 1.2310 level we have the confluence of the red 21 moving average, the 38.2% Fibonacci retracement level and the downward trendline. That’s where the sellers are likely to pile in with a defined risk above the trendline to position for another selloff into the 1.18 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the last leg lower diverged with the MACD which is usually a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are still in the pullback territory, but if the price breaks above the downward trendline we will have a confirmation of a reversal and the buyers will target new higher highs.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have some key zones where the price is likely to react to. From a risk management perspective, the buyers would be better off waiting for the price to come into the counter-trendline around the 1.2180 level where they will have a much better risk to reward setup to target the 1.2310 resistance. In case the price breaks below the counter-trendline, the sellers will likely jump onboard and target the 1.1839 level.
Upcoming Events
This week the market is likely to focus on the CPI report as that’s what might change the expectations around the next FOMC rate decision. Tomorrow, we will see the US PPI data and later in the day the FOMC Meeting Minutes. On Thursday, it will be the time for the US CPI report, and at the same time we will also get the latest Jobless Claims figures. On Friday we conclude the week with the University of Michigan Consumer Sentiment report.