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 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 but remains
  resilient with US Jobless Claims beating expectations week after week.
• The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
• The US Retail Sales beat expectations across the board.
• The University of Michigan Consumer Sentiment report jumped to the highest levels since
  2021.
• The Fed members recently have been pushing
  back on the aggressive rate cuts expectations.
• The market’s expectations for the first rate cut
  were pushed back to May following strong economic data.

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.
• The latest employment report showed job losses in December and
  lower than expected wage growth.
• The UK CPI beat expectations across the board, which is
  going to reinforce the BoE’s neutral stance.
• The last 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.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD bounced
on the key support around
the 1.2610 level and rallied into the 1.2750 level as the buyers piled in to
target the 1.28 handle. There’s not much to glean from this timeframe as the
price trades right in the middle of the range, so we need to zoom in to see
some more details.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair has
been rising tentatively as both the currencies remain relatively strong. We can
see that we have a trendline where
there’s also the red 21 moving average for confluence. This is
where the buyers should lean onto to position for a continuation of the rally
with a better risk to reward setup. The sellers, on the other hand, will want
to see the price breaking lower to invalidate the bullish setup and position
for a drop back into the 1.26 handle.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD for
quite some time. This is generally a sign of weakening momentum often followed
by pullbacks or reversals. In this case, it should point to a pullback into the
trendline where the buyers will have the opportunity to increase their bullish
bets with a better risk to reward setup. Conversely, if the price were to break
below the trendline a reversal would be confirmed, and the sellers will pile in
to target a drop back into the 1.26 support.

Upcoming Events

This week is a bit more tranquil on the data front with
the major releases scheduled for the final part of the week. We begin tomorrow
with the UK and the US PMIs. On Thursday, we have the Advance US Q4 GDP and the
latest US Jobless Claims figures. Finally, on Friday we conclude the week with
the US PCE report.

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