USD
- The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
- The latest US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
- The US NFP report beat expectations across the board by a big margin.
- The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
- The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
- The market now expects the first rate cut in May.
GBP
- The BoE left interest rates unchanged as expected at the last meeting removing the tightening bias but reaffirming that they will keep rates high for sufficiently long to return to the 2% target.
- The latest employment report showed job losses in December and lower than expected wage growth.
- The UK CPI beat expectations across the board, which gives the BoE a reason to remain patient.
- The latest UK PMIs showed the Manufacturing sector improving but remaining in contraction while the Services sector continues to expand.
- The latest UK Retail Sales missed expectations across the board by a big margin as consumer spending remains weak.
- The market expects the BoE to start cutting rates in May.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD finally broke out of the range and quickly fell to the next support zone around the 1.25 handle where we can also find the 38.2% Fibonacci retracement level for confluence. This is where the buyers stepped in with a defined risk below the level to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking this support as well to start targeting the 1.22 handle.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a much better risk to reward setup around the previous support now turned resistance where we can also find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. The buyers, on the other hand, will want to see the price breaking above the resistance to invalidate the bearish setup and increase the bullish bets into the next resistance.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the current short term trend to the upside. If the price were to break below the trendline, we can expect the sellers to pile in already to position for a break below the 1.25 handle and new lower lows. The buyers, on the other hand, should keep on leaning on the trendline to continue targeting the 1.26 resistance.
Upcoming Events
This week is basically empty on the data front with just the latest US Jobless Claims figures on Thursday being the only notable release.
