GBP/USD and EUR/GBP Prices, Charts, and Analysis
- A mildly dovish Fed rate hike allows cable to move higher.
- All options are open for the ECB later today.
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The US central bank raised the Fed funds to 5.25% yesterday, the highest level seen since September 2007 but a change in the post-decision language suggests that the Fed may put on hold any further increases in the borrowing rate. Fed chair Jerome Powell swapped out the existing statement of ‘some additional policy firming may be appropriate’ seen over the last year to a more dovish,
‘In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.’
While chair Powell was never going to explicitly say that the central bank was on hold and paint himself into a corner, his change of tone did suggest a pause is the most likely course of action. And the markets are already pricing in a pause at the next two FOMC meetings before a series of rate cuts begin.
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The weakness in the US dollar post-FOMC helped GBP/USD to a near one-year high of 1.2590, nearly eight big figures than the March 8th swing low. The chart set-up remains positive with all three moving averages providing support, especially the 20-dma, leaving the late-May 2022 high t 1.2667 the next target. Cable is also printing a short-term series of higher lows which should act as support. Traders should be aware of both the ECB rate decision today – a hawkish outlook may weaken the US dollar further – while Friday’s US Jobs Report (NFP) is always capable of driving a dollar move.
GBP/USD Daily Price Chart – May 4, 2023
Chart via TradingView
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Today’s ECB monetary policy will be the driver of the next move in EUR/GBP. The market consensus is for a quarter-point rate hike although a half-point rate hike remains a possibility. Again the post-decision press conference will be the main focal point. There is a possibility of a 25bp hawkish hike or a 50bp dovish hike, and President Lagarde’s language will be closely parsed. Current market pricing is for the ECB to raise interest rates by a total of just under 70 basis points including any movement at today’s meeting.
EUR/GBP remains constrained in low volatility, two-month range of 0.8721 to 0.8925. Support is also braced by the 200-day moving average, currently at 0.8727, while the short- and medium-dated moving averages are giving out a mixed message.
EUR/GBP Daily Price Chart – May 4, 2023
Chart via TradingView
What is your view on the GBP/USD and EUR/GBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.