Fundamental Overview
The USD got boosted once again by negative tariffs news overnight as Bessent talked about universal tariffs starting at 2.5% and gradually increasing by the same amount every month, which eventually could reach 20%. Trump later doubled down on that saying that he wants tariffs much bigger than 2.5%.
The tariffs risk has been the only thing keeping a bid under the US Dollar after the US inflation data marked the top in the repricing in interest rates expectations. So, when this risk eases, the greenback weakens and vice versa. Tomorrow, we have the FOMC decision where the central bank is expected to keep rates steady. If Fed Chair Powell sounds more dovish, we could see the greenback weakening again.
On the GBP side, the UK PMIs last week jumped to a 3-month high although S&P Global noted that the economy faces a stagflationary scenario amid jobs shedding and increased inflationary pressures. Despite that, the market continues to expect a rate cut at the upcoming meeting and a total of 71 bps of easing by year end.
GBPUSD Technical Analysis – Daily Timeframe
GBPUSD Daily
On the daily chart, we can see that GBPUSD is testing the major broken trendline. This is where we can expect the buyers to step in to position for an extension of the rally into the 1.28 handle. The sellers, on the other hand, will want to see the price falling back below the trendline to start targeting new lows.
GBPUSD Technical Analysis – 4 hour Timeframe
GBPUSD 4 hour
On the 4 hour chart, we can see that we have an upward trendline defining the bullish momentum. The buyers will likely lean on the trendline to position for a rally into the 1.2577 level next. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.
GBPUSD Technical Analysis – 1 hour Timeframe
GBPUSD 1 hour
On the 1 hour chart, we can see that we have a minor downward trendline defining the current pullback. The sellers will likely lean on it to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into the 1.2577 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US Consumer Confidence data. Tomorrow, we have the FOMC Policy Decision. On Thursday, we get the US Q4 GDP report and the latest US Jobless Claims figures. On Friday, we conclude the week with the US PCE and the US Employment Cost Index.