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 CPI slightly beat expectations but analysts
  expect the Core PCE to print at 0.2% M/M again following the CPI data.
• The labour market continues to soften although Initial Claims keep on hovering around cycle lows while
  Continuing Claims got stuck at a higher level.
• 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 continues
to consolidate around the highs as there’s not much policy divergence between
the two central banks now given that the market expects both of them to start
cutting rates soon. The sellers are likely to step in around the 1.28 handle to
position for a drop into the recent support around
the 1.26 handle as the rangebound price action is likely to continue.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
range between the 1.26 support and 1.28 resistance. The best strategy is
generally to sit out and wait for a breakout supported by a fundamental
catalyst, but one can also “play the range” by selling at resistance and buying
at support.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price action has been choppy and quite erratic. There are no clear levels where
to lean on except the resistance zone around the 1.28 handle and the support
zone around the 1.26 level. We have the UK GDP data in a few minutes but
whatever the data will show, the pair is likely to reject the resistance given
that it won’t be enough to change the big picture.

Upcoming Events

Today the only notable events on the agenda are the
UK GDP and the US PPI data.

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