The market firmed up rate cut bets with
62 bps of easing seen by year-end. Overall, the data doesn’t really point in
that direction, but we will need to see more of it to confirm or deny the
market pricing.
Given the negligible
changes to the big picture after all the data, the US dollar remained mostly
rangebound with mixed performance against the major currencies. The future
outlook will still be guided by the evolution of the data.
This week, all the
important stuff will be released on Friday as we get the US Flash PMIs and the
Q4 GDP. We might also get the US Supreme Court decision on Trump’s tariffs.
GBP:
On the GBP side, it’s going
to be a big week for the pound as we get the most important economic releases. In
fact, tomorrow we begin with the UK employment report, followed in the coming
days by UK CPI, Flash PMIs, and retail sales data. Given the market pricing, higher than expected data will likely give the pound a boost, while soft figures could weigh on the currency.
As a reminder, the
BoE surprised with a dovish hold at the last meeting as 4 members
dissented for a rate cut versus 2 expected. Moreover, they changed the guidance
in the statement from “the bank rate is likely to continue on a gradual
downward path” to “the bank rate is likely to be reduced
further”.
Inflation forecasts were
also revised much lower across the board. Lastly, the Agents’ Pay Survey showed
wage growth to average 3.4% in 2026 vs 3.5% expected. Traders are now pricing a
65% chance of a rate cut at the next meeting already and a total of 48 bps of
easing by year-end.
GBPUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that GBPUSD couldn’t extend the drop into the major
trendline and bounced near the 1.35 handle. We got stuck in a consolidation
last week as the US data didn’t change anything in the bigger picture. There’s
not much we can glean from this timeframe, 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 a few important swing levels. The price bounced around the 1.3586 level
which has been defining the rebound into the highs. A break above the 1.3732
level should open the door for a rally into the cycle highs and we can expect
the buyers to pile in on the break. The sellers, on the other hand, will likely
step in at the 1.3732 level with a defined risk above it to position for a drop
into the major trendline.
GBPUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, we can
see the price broke above the downward trendline that was defining the bearish
momentum on this timeframe. We now have the 1.3670 level that could act as
resistance. That’s where we can expect the sellers to step in with a defined
risk above the level to position for a drop into the major trendline. The
buyers, on the other hand, will look for a break higher to extend the rebound
into the 1.3732 level next. On Wednesday, we have the UK CPI
and the FOMC Meeting Minutes. On Thursday, we get the latest US Jobless Claims
figures
