The BOE is up today!
What does GBP/USD look like after the Fed’s decision and before BOE’s event?
Before moving on, ICYMI, yesterday’s watchlist checked out USD/JPY’s ascending channel ahead of the FOMC decision. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. headline retail sales dip by 0.3%, records first decline in five months as inflation bites
NY manufacturing index contracts for a second month, up from -11.6 to -1.2 in June
NAHB Housing Market Index ticks down from 69 to 67 in June as mortgage rates climb
Fed lifts rates by 75 basis points, the largest rate hike since 1994
Fed raises inflation forecasts from 4.3% to 5.2% by year-end, downgrades 2022 GDP projections from 2.8% to 1.7%
Fed’s dot plot suggests 175-basis point increase to 3.40% over the next four meetings
Fed’s Powell: “I do not expect moves of this size to be common”
New Zealand’s economy contracts by 0.2% in Q1 2022 (vs. 3.1% in Q4) as exports slump
Japan records 10th consecutive monthly trade deficit registered at 2.39T JPY, the largest since January 2014
Melbourne Institute inflation expectations higher from 5.0% to 6.7% in June
Australia’s unemployment rate steady at 3.9% in May
Australia adds a net of 60.6K jobs vs. 25K expected, 4.4K previous
Asian shares fall as Fed hike relief rally fizzles
Swiss National Bank unexpectedly hikes rates by half a point, boosts CHF
Upcoming Potential Catalysts on the Forex Economic Calendar:
BOE’s monetary policy decision at 11:00 am GMT
Canada’s wholesale sales at 12:30 pm GMT
U.S. Philly Fed manufacturing index at 12:30 pm GMT
U.S. initial jobless claims at 12:30 pm GMT
U.S. building permits and housing starts at 12:30 pm GMT
NZ BusinessNZ manufacturing index at 10:20 pm GMT
BOJ’s monetary policy decision scheduled during the Asian session
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: GBP/USD
In case you missed it, GBP/USD found support at the 1.1950 minor psychological zone earlier this week.
The upswing got fresh legs after traders priced in the Fed’s commitment to fight inflation and Powell’s assertion that 75-basis point rate increases are “uncommon.”
GBP/USD is finding resistance at the 1.2200 handle, though, thanks to the 1-hour chart’s 100 SMA lining up with the 38.2% Fibonacci retracement and a previous swing high.
Should we expect more losses for GBP/USD?
The Bank of England (BOE) is printing its policy decisions today and, if market estimates are right, then we could see a 25 basis-point increase from the Monetary Policy Committee (MPC)
I wouldn’t discount a surprise though! The Fed already “surprised” some traders with a 75-basis point rate increase when members only hinted at a 50-bp hike last month. Heck, even the Swiss National Bank (SNB) surprised markets with a 50-bp increase today!
Unless we see a 50-bps or higher interest rate hike from BOE, then GBP/USD could extend its downswing all the way back to the 1.1950 previous lows or new monthly lows.
If today’s risk-taking in the equities markets leads to GBP strength, or if BOE raises its rates more aggressively than expected, then GBP/USD could bust above the 1.2200 resistance and even make its way to the 1.2500 previous inflection point.
