USD

• The Fed left interest rates unchanged as expected at the last meeting with a shift in
  the statement that indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long.
• The latest US PCE missed expectations across the board with
  the Core 6-month annualised rate falling below the Fed’s target at 1.9%.
• The NFP report beat
  expectations although there was more weakness under the hood.
• The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
• The hawkish Fed members have been leaning
  on a more neutral side lately.
• The market expects the Fed to start cutting rates
  in Q1 2024.

GBP

• The BoE left interest rates unchanged as expected at the last meeting
  with no dovish language as they reaffirmed that they will keep rates high for
  sufficiently long to return to the 2% target.
• Governor Bailey pushed back against rate cuts
  expectations as he said that they cannot state if interest rates have
  peaked.
• The latest employment report missed forecasts with wage growth
  coming in much lower than expected and job losses in November.
• The UK CPI missed expectations across the board, which is
  another welcome development for the BoE.
• The UK PMIs showed the Manufacturing sector falling
  further into 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 Q2 2024.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD is
consolidating around the highs as the market expects both the central banks to
start cutting rates soon. We can see that the latest leg higher diverged with the
MACD, which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the target for a pullback should be around the 1.25
handle.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair recently
bounced around the 1.26 handle following the weak US data. Overall, there’s not
much to do here as we don’t have clear levels where to lean on. In fact, the
buyers would be better off to wait for a pullback into the 1.25 handle where
they will have a stronger risk to reward setup.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the main swing levels marked on the
chart. The sellers should pile in at every break lower with the 1.25 handle as
the ultimate target. The buyers, on the other hand, are likely to use these
swing levels to try to position for a rally into new highs.

Upcoming Events

This week is a bit bare on the data front with the main
releases scheduled for the final part of the week. In fact, on Thursday we get
the US CPI report and the US Jobless Claims figures, while on Friday we
conclude the week with the UK GDP and the US PPI data.

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