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 US PPI missed expectations across the board
  supporting the disinflationary impulse.
• The labour market continues to soften although Initial Claims keep on hovering around cycle lows while
  Continuing Claims are ranging 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 March 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 May 2024

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD has been
consolidating between the 1.26 support
and the 1.28 resistance as the lack of a clear divergence between the two
central banks has led to a rangebound price action. There’s not much to glean
from this timeframe, so we need to zoom in to find some more clarity.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair sold
off in the APAC session with some risk off flows but the price got a bit
overstretched as depicted by the distance from the blue 8 moving
average. In such instances, we can generally see a pullback into the moving
average or some consolidation before the next move. Given the rejection from
the 1.28 resistance, the sellers might be in control at the moment and the
natural target should be the 1.26 support.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
have a good resistance zone around the 1.2710 level where we can find the confluence
with the downward trendline,
the 61.8% Fibonacci
retracement level and the red 21 moving average. This is where we can
expect the sellers to step in with a defined risk above the trendline to target
the 1.26 support. The buyers, on the other hand, will want to see the price
breaking higher to invalidate the bearish setup and position for a rally into
the 1.28 resistance.

Upcoming Events

Today, we have the UK labour market report on the agenda
and later in the day all eyes will be on Fed’s Waller as the market will be
eager to see if he decides to pushback against the aggressive rate cuts
expectations. Tomorrow, we will get the UK CPI data while later in the day we
will see the latest US Retail Sales report. On Thursday, we will get the US
Jobless Claims figures while on Friday we conclude the week with the UK Retail
Sales and the University of Michigan Consumer Sentiment survey.

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