Daily Forex News and Watchlist: GBP/USD

I spy with my eye Cable hanging out near a key technical support zone!

Will GBP/USD have cause to remain in the range today? Or will GBP bears find enough reasons to force a bearish breakout?

Before moving on, ICYMI, yesterday’s watchlist looked at USD/CAD’s downtrend ahead of the FOMC decision. Be sure to check out if it’s still a good play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

U.S. quarterly employment cost index for Q4 2023: 0.9% q/q (1.0% forecast, 1.1% previous); Wages and salaries (from 1.2% to 0.9%) and benefit costs (0.9% to 0.7%) also showed quarterly slowdown

U.S. Chicago PMI fell from 47.2 to 46.0 in January (48.0 forecast)

EIA’s crude oil inventories increased by 1.2M barrels in the week ending Jan. 26 (0.8M-barrel draw expected, 9.2M-barrel draw in the previous week)

As expected, the Fed kept its target interest rate range at 5.25% – 5.50% in January

Fed Chairman Powell shed their tightening bias with “It’s a highly consequential decision to start the process of dialing back on restriction,” but pushed back against March rate cut bets with “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting.

Australia’s building approvals for December: -9.5% m/m (0.5% forecast, 0.3% previous)

Australia’s quarterly import prices in Q4 2023: 1.1% q/q (0.6% forecast, 0.8% previous) but down 3.1% y/y; Export prices up by 5.6% q/q and down 4.8% y/y

Japan’s au Jibun Bank manufacturing PMI confirmed at 48.0 in January; “Depressed economic conditions at home and globally weighed heavily on the sector”

China’s Caixin manufacturing PMI steady at 50.8 (as expected) in January, the first time the index remained in expansion zone for three straight months since May 2021

Australia’s commodity prices in January: -10.4% y/y (-11.2% in December)

Spain’s manufacturing PMI in January: 49.2 (47.9 forecast, 46.2 previous)

Switzerland’s manufacturing PMI in January: 43.1 (44.5 forecast, 43.0 previous)

Italy’s manufacturing PMI in January: 48.5 (47.0 forecast, 45.3 previous)

France’s final manufacturing PMI revised lower from 43.2 to 43.1 in January; “The recession in the manufacturing sector is broad-based…The attacks in the Red Sea are leaving their mark

Germany’s final manufacturing PMI revised higher from 45.4 to 45.5 in January; “Although the German manufacturing sector remains entrenched in recessionary territory in January, the pace of the downturn is unmistakably slowing.

Price Action News

Overlay of AUD vs. Major Currencies

Overlay of AUD vs. Major Currencies Chart by TradingView

A lot of the U.S. dollar’s counterparts were smacked lower, likely due to some traders unwinding their Fed rate cut bets ahead of this week’s U.S. NFP reports. It also didn’t help that Powell pushing back against a March rate hike got some risk-takers pretty salty about it.

The Australian dollar, in particular, saw heavy hits even against other counterparts. One possible reason is the worse-than-expected building approvals and NAB’s quarterly business confidence releases.

AUD is trading in the red across the board but it’s sustaining the heaviest losses against safe havens like JPY, CHF, and USD while limiting its losses against NZD and EUR.

Upcoming Potential Catalysts on the Economic Calendar:

Eurozone’s final manufacturing PMI at 9:00 am GMT
U.K.’s final manufacturing PMI at 9:30 am GMT
Eurozone’s CPI flash estimates at 10:00 am GMT
Eurozone’s unemployment rate at 10:00 am GMT
Italy’s preliminary CPI at 10:00 am GMT
BOE’s policy decision at 12:00 pm GMT; Gov. Bailey’s presser scheduled at 12:30 pm GMT
U.S. Challenger job cuts at 12:30 pm GMT
U.S. preliminary quarterly labor costs at 1:30 pm GMT
Canada’s manufacturing PMI at 2:30 pm GMT
U.S. ISM manufacturing PMI at 3:00 pm GMT

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action!  ️

GBP/USD 15-min Forex

GBP/USD 15-min Forex Chart by TradingView

Who’s looking at GBP pairs ahead of the Bank of England’s (BOE) policy decision? If you are, then you’ll want to check GBP/USD’s 15-minute chart.

As you can see, GBP/USD wasn’t spared from the USD strength that we saw following Powell’s pushback against March interest rate cut bets.

The pair dropped below the 1.2700 mid-range levels to trade closer to the 1.2650 S1 Pivot Point and range support area.

Will GBP/USD remain inside the range this week? Or are we looking at a downside breakout in the making?

Later today, the markets expect BOE members to keep their monetary policies steady in February. Unlike the other major central bankers, though, we could see a bit more hawkish tilt from Governor Bailey and his friends.

We mentioned in the BOE Monetary Policy Statement Event Guide that inflationary risks appear unusually elevated for the U.K. economy, which is why at least some BOE members may stick to their hawkish biases.

If today’s voting split suggests a longer road to interest rate cuts compared to the Fed, then GBP/USD may attract buying pressure. The pair could bounce from the S1 Pivot Point line and revisit previous inflection points such as the 1.2690 previous high or the 1.2700 psychological area.

Before you buy GBP/USD like there’s no tomorrow, though, keep in mind that there are other potential catalysts that may affect GBP/USD’s prices. The U.S. weekly jobless claims and monthly ISM manufacturing PMI, for example, could swing USD’s prices and drag GBP/USD lower.

However you choose to trade this setup, make sure to stick around in case you need to make short-term adjustments to reflect a choppy trading environment!

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