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 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.
- 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 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 got rejected almost perfectly from the key resistance around the 1.2310 level where we had the confluence with the 38.2% Fibonacci retracement level and the trendline. This is where the sellers stepped in with a defined risk above the trendline to position for a drop into the 1.1840 level. The buyers will need the price to break above the trendline to switch the bias from bearish to bullish and start targeting new higher highs.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the break below the counter-trendline saw even more sellers piling in and extending the selloff into the 1.21 handle. Yesterday, we got a nice pullback into the red 21 moving average where we got a rejection as the sellers leant on the moving average and the previous swing high level. We can expect the bearish momentum increasing if the UK data today and tomorrow misses expectations.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the last leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got the pullback into the last swing high where the sellers stepped in to position for another drop into the lows. The buyers, on the other hand, are likely to pile in around the support at 1.2175 or on a break above the swing high at 1.2220. If the price breaks below the 1.2175 support, the sellers should gain full control and we will likely see new lows.
Upcoming Events
Today we will get the UK labour market report at the top of the hour and the US Retail Sales data later in the day. Tomorrow, we will see the latest UK inflation figures which could be important for the BoE, especially if the data surprises notably to the upside. On Thursday, we will get the US Jobless Claims report and we will also hear from Fed Chair Powell. Finally, on Friday, we conclude the week with the UK Retail Sales data.