- GBP/USD has fallen a touch with a firmer dollar on less dovish than expected Fed outcome.
- US Fed interest rate decision actual: 1.75% vs 1.75% previous; est 1.75%.
GBP/USD is trading in a narrow range following the Fed holding rates steady yet signalling that there will not be a change in rates in 2020, something quite to the contrary of Fed watchers. GBP/USD is currently trading at 1.3179 at the time of writing having travelled between 1.3107 and 1.3186 on the day,
Key takeaways from FOMC statement and projections
- The market has priced in virtually no chance of rate move through February.
- IOER 1.55% vs 1.55% prior.
- Fed drops language about ‘uncertainties about this outlook remain’.
- Vote was unanimous.
- “The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate”.
- No changes in the economic outlook paragraph.
- Says “the current stance of monetary policy is appropriate”.
- Leaves forecasts for GDP and inflation unchanged, lowers unemployment.
- Median forecast is for one rate hike in 2021 and one in 2022.
Fed projections
Fed statement changes
UK elections are the major focus
We are now counting down to the UK election vote for Thursday where results are expected to come in from around 0200 GMT onwards. Sterling has been better offered as of yesterday’s YouGov outcome that proved the Conservative’s lead was narrowing. There are mounting risks of a hung parliament – an outcome discussed in more detail here.
- UK Election Preview: GBP bulls to hold their horses
GBP/USD levels
- Bullish targets: 1.3160/87 (pre-Fed high 1.3186), 1.3380, 1.3850.
- Bearish targets: 1.3013 (pre -ed low 1.3107), 1.2930, 1.2768.
Bulls have been failing at the confluence area of the 50% mean reversion of the mid-April-3rd September range in the 1.3160s and a five-year downtrend with a confluence of the 200-week moving average. 1.3187 May highs have been reinforcing this area.
- Chart of the week: GBP/USD bulls target closes above critical 1.3160/90 on UK election week
On the downside, bears can target a break to a prior 38.2% retracement around 1.3000. 1.2750/70 guards the prior 23.6% Fibo that meets the 19th Sep highs around 1.2550 on the wide.
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