GBP/USD's initial knee jerk reaction to the FOMC outcome, making fresh lows and highs

Ross J Burland FXStreet

Currently, GBP/USD is trading at 1.3529, up 0.21% on the day, having posted a daily high at 1.3658 and low at 1.3495.

Prior to the outcome of the FOMC, bulls were taking back control when cable rose by nearly a cent to 1.3608 the highs on the UK retail sales beat overnight and was making fresh pre-FOMC highs for the US session at 1.3601, in pursuit of London's aformentioned high. However, on the outcome of the FOMC, GBP/USD was two-way business on the knee-jerk, making a fresh high and low for the session.

FOMC main takeaways:

With the dot plot of the Fed's funds rate as the main focus, the FOMC continues to forecast one more hike in 2017, three more in 2018.

The Federal Reserve left rates in the 1.00%-1.25% range.
The Fed announced that it will begin to unwind of $4.5 trillion balance sheet in October.
Hurricanes unlikely to affect the medium-term path of the economy.

Correlated reactions:

US ten-year yields have picked up to 2.2340 at the time of writing, but still -0.47% on the day.
The DXY has popped to 91.95 at the time of writing.
Stocks are mostly unchanged.
WTI is little changed at 50.84.

EUR/GBP: Having fallen half-a-penny to 0.8825 lows on the UK retail sales beat, the cross is now printing new lows at 0.8796 and remains down troddern.

GBP/USD levels

Analysts at Commerzbank previously noted that critical resistance was located at 1.3670, a double Fibo and the 2014-2017 downtrend. They explained that given the convergence of resistance here we would expect this to hold the initial test and provoke some profit taking. "In order to alleviate immediate upside pressure the market will need to fall sub 1.3267 (August high)," the analysts added.

Next in focus

UK: Political whispers: ANZ

Yellen's presser coming up, and UK PM May's Brexit speech on Friday: Downing Street announced that a speech by Theresa May has been billed as an important moment in the Brexit negotiation process. This will take place in Florence 22nd September.

UK: PM May’s speech about Brexit in the limelight - BBH

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD edges lower below 1.1650 as Middle East tensions fuel US Dollar strength

The EUR/USD pair trades in negative territory around 1.1635 during the early Asian session on Thursday. The US Dollar strengthens against the Euro as escalating Middle East conflict boosts safe-haven flows. Traders brace for the Eurozone Retail Sales and US weekly Initial Jobless Claims reports, which will be released later on Thursday.

GBP/USD tests key moving averages as growth downgrade weighs

GBP/USD was nearly flat on Wednesday, edging up 0.08% to settle around 1.3370 in a quiet session. The pair has fallen sharply from its late-January high near 1.3870 and is now testing the 200-day Exponential Moving Average, with this week's one-week forex heatmap showing Pound Sterling as one of the worst performers against the US Dollar, down about 1.4% on the week.

Gold benefits from a retreating USD; reduced Fed rate cut bets cap gains

Gold attracts some buyers for the second consecutive day on Thursday amid a modest US Dollar pullback from an over three-month high, though it remains below the $5,200 mark. Wednesday's upbeat US macro data further tempered hopes for three rate cuts by the Fed in 2026. Furthermore, escalating Middle East tensions might continue to benefit the USD's status as the global reserve currency and contribute to capping the bullion.