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  • FOMC leaves rates and bond-buying unchanged, dollar under pressure.
  • GBP/USD has completed a 38.2% Fibonacci retracement of the early European session from 1.3001 to 1.3135.

Following the BoE’s easing, which will keep weighing on GBP, the Federal Reserve’s interest rate decision did little to surprise anyone.

FOMC left rates and bond-buying unchanged. The outcome was fully expected. 

However, the emphasis is on easing and additional stimulus that is required from the US government which is pressuring the greenback lower this week.

DXY is on the path of a fresh low for the day, trading at 92.6270 vs the low of 92.4880. 

The Federal Open Market Committee’s statement is virtually unchanged, with there just being the slightest of adjustments to its note over economic activity. 

The FOMC has said that economic activity and employment have ‘continued to recover’ vs ‘picked up’ in the prior statement.

BoE surprises but sends GBP higher 

Earlier in the day, the Bank of England’s Monetary Policy Committee (MPC) unanimously voted to maintain its benchmark Bank rate at 0.1%, as expected.

However, the changes to their Quantitative Easing and economic forecasts within the Monetary Policy Report (MPR) were capturing the market’s attention.

The MPC stated that it was responding to the rapid rise in COVID infection rates and subsequent restrictions across the UK.

The impact of the lockdown is substantial and warranted the MPC’s moves to increase its Asset Purchasing Programme by GBP150bn to a total of GB895bn surpassed the majority of market expectations of just a GBP100bn increase.

The programme is to last until the end of 2021, beyond the summer which markets were anticipating.

However, rather than seeing a drop in the pound, it actually rallied as the USD sunk.

We have seen a jump in risk-FX due to the US elections which sent GBP/USD to rally above 1.3100 in the close of UK trading and the NY handover. 

”The added support to the economy and the broader global lift in risk sentiment saw GBP perform strongly, notably against the weakening USD,” analysts at Westpac explained.

”FX market attention remains firmly focused on US political developments. We think it may be difficult for GBPUSD to escape familiar ranges until more clarity emerges there,” analysts at TD Securities argued.

GBP/USD technical analysis

In an hourly bullish technical environment, GBP/USD has completed a 38.2% Fibonacci retracement of the early European session from 1.3001 to the 1.3135 high.

Cable, therefore, could be due to extend for a full test of the 1.3150 psychological round number where the -0.272% Fibonacci of the correction points to. 

On failures at this current resistance, however, the downside is in play below 1.3100 and 1.3070 and towards yesterday’s NY mid-afternoon peak around 1.3040.