US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation measures since then showed further disinflation.
- The labour market displayed signs of softening although it remains fairly solid.
- Overall, the economic data started to surprise to the downside lately.
- Last week the ISM Services PMI and Jobless Claims surprised to the upside.
- The Fed members are leaning more towards a pause in September.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now a 50/50 chance of a hike in November.
UK:
- The BoE hiked by 25 bps as expected at the last meeting.
- 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 preference for a “high 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 a stagflation.
- The UK PMIs recently missed expectations across the board with the Services sector plunging into contraction.
- The market expects the BoE to hike by 25 bps at the upcoming meeting.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD bounced around the 1.2450 level and it’s now probably pulling back to retest the broken support turned resistance at the 1.26 handle. In fact, there’s some good confluence there as we can find also the downward trendline and red 21 moving average. The sellers are likely to step in there with a defined risk above the trendline and target a fall into the 1.2310 level.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price on this timeframe made a higher high recently and the moving averages have crossed to the upside. So, the short term market structure is now bullish and we should see a rally into the 1.26 handle where we can also find the Fibonacci retracement levels for further confluence. This remains a sellers’ market as the buyers will need the price to break above the trendline with conviction to invalidate the bearish bias.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we started to diverge with the MACD after the breakout. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, the price broke above the short term trendline and confirmed the reversal that should go on until the 1.26 handle. Today we have the UK Jobs report and strong figures, especially on the wages side, should give the pair a boost and take it into the resistance zone.
Upcoming Events
This week we have many important events beginning with the UK Jobs report today. The data shouldn’t change much the expectations for the upcoming BoE meeting, but it can influence the market pricing beyond the September meeting. A strong report is likely to boost the GBP in the short term, while a weak one should weaken it. Tomorrow it will be the time for the US CPI, which is expected to show an increase in headline inflation but further disinflation in the core measure. On Thursday, we will see the latest US Jobless Claims, PPI and Retail Sales data. Finally on Friday, we get the University of Michigan Consumer Sentiment report.
