USD
- The Fed left interest rates unchanged as expected with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The recent US Core PCE came in line with expectations.
- The labour market is starting to show some weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
- The US Consumer Confidence and University of Michigan Consumer Sentiment continue to fall.
- The recent US ISM Manufacturing PMI missed expectations by a big margin, followed by a disappointing ISM Services PMI, although the latter remained in expansion.
- The recent Fedspeak has been leaning on the hawkish side, but the inflation and labour market reports before the next meeting will decide whether they will indeed hike or not.
- The market doesn’t expect the Fed to hike anymore.
GBP
- The BoE kept interest rates unchanged as expected at the last meeting.
- The central bank is leaning towards keeping interest rates “higher for longer”, although it keeps a door open for further tightening if inflationary pressures were to be more persistent.
- BoE Governor Bailey repeated that they will keep rates high for long enough to get inflation back to target.
- The latest employment report showed a slowdown in wage growth and some job losses in September which are pointing to a softening labour market.
- The recent UK CPI slightly beat expectations but given the softening in the labour market it’s unlikely to change the BoE’s stance.
- The UK PMIs showed further contraction in the services sector, which accounts for 80% of UK’s economic activity.
- The market doesn’t expect the BoE to hike anymore.
GBPUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that GBPUSD managed to break above the 1.23 handle at the start of the month but erased most of the gains as the US Dollar got supported by rising Treasury yields. The price recently bounced on the red 21 moving average as the buyers continue to target a bigger correction into the 1.25 handle. The pair at the moment is in a kind of a limbo, but the bias is skewed to the upside given the series of higher highs and higher lows and the moving averages being crossed to the upside.
GBPUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair last week bounced on the 1.22 handle where we had also the 61.8% Fibonacci retracement level for confluence. The break above the counter-trendline saw more buyers piling in as the momentum favoured the upside. The sellers are likely to lean on the 1.23 resistance again to position for a bigger drop into the lows, so the buyers will need to break above that level to increase the bullish bets.
GBPUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the buyers are likely to lean on the upward trendline as they have also the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for new lower lows. Watch out for the UK jobs data at the top of the hour.
Upcoming Events
This week we have some top tier economic releases. Today, at the top of the hour we will see the UK jobs data while later in the day, we will also get the US CPI report which might be one of the most important events of the week. Tomorrow, we have the UK CPI report and the US Retail Sales and PPI data. On Thursday, the market will be focused on the latest US Jobless Claims figures, while on Friday we conclude the week with the UK Retail Sales.
