GBP/USD Analysis
- Economic calendar quiet but scattered with central bank speakers
- GBP/USD tests prior zone of support after temporarily trading below the 200 SMA
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Economic Calendar Quiet but Scattered with Central Bank Speakers
This continues to be a quiet week from a scheduled risk perspective but we are still to hear from a number of prominent Fed officials and potentially hear why the Bank of England’s lone dove, Swati Dhingra voted for a cut in the January meeting.
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Thus far, Fed speak this week made reference to the positive signs shown on the inflation front, the possibility of a challenge in getting inflation to that 2% marker from current levels, and a combined feeling that no one on the committee feel hurried into delivering the first interest rate cut as the US economy marches on.
Interest Rate Cuts Derived from Market Expectations
Source: Refinitiv, prepared by Richard Snow
GBP/USD Back Within Familiar Territory for Now
GBP/USD has managed to reclaim some of the lost ground yesterday and this morning. The prior NFP-inspired drop appears to have lost momentum after Monday’s close, resulting in a partial recovery. Such a move is not surprising given the magnitude of the sell-off over such a short period of time, especially when considering the smaller daily range exhibited in the sessions prior.
The 200 SMA remains a key level for a bearish continuation, but first, a daily close below 1.2585 (channel support) is required. Fundamentally, the US economy is streets ahead of the UK which is pushing back the anticipated start of rate cuts in the US. US GDP is moderating but surprised to the upside in Q4, the labour market is growing despite news of retrenchments nearly every week, and services PMI data revealed a number of forward-looking indicators have shown significant improvement – lifting sentiment even further.
Resistance appears at the December swing high of 1.2736 followed by channel resistance at 1.2800.
GBP/USD Daily Chart
Source: TradingView, prepared by Richard Snow
| Change in | Longs | Shorts | OI |
| Daily | -1% | -2% | -2% |
| Weekly | -11% | 40% | 10% |
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX