The Federal Reserve decided to keep the current policy unchanged, including the Fed Fund Rate. Moreover, the Fed showed a balanced tone, which was somehow widely expected.
The Fed also said that trimming its balance sheet is in progress as agreed before, while the economy is likely to expand in moderate pace, despite the recent hurricanes, which has led to a notable decline in jobs growth, but of course this is likely to be for a short period of time.
At the same time, the Fed stressed that inflation is still low and likely to remain on the downside for some time.
Overall, there was nothing new, the info the Fed released yesterday was already aware of a while ago. Yet, the Fed Fund Futures is pricing in 87% chance for another rate hike in December.
However, the US Dollar remained within a tight range, but slipped in Asia as Trump tweeted that he will announce his pick for the Fed chair later today at 19:00 GMT.
Wall St. Journal noted that Jerome H. Powell will be the next Fed chair according to trusted sources.
Bank of England At Cross Road
In few hours, all eyes will be headed toward the Bank of England decision at 12:00 GMT+ followed by the Press Conference which should be held at around 12:30 GMT+.
Estimates points to a 25bps rate hike following the recent spike in inflation to 3%, while growth remains very weak compared to historical standards.
Some would say how would the bank increase the rate while growth is still weak. Here its all about controlling inflation. The last thing the Bank of England need is to lose control on inflation, even if the economy slide back into recession.
What Matter’s The Most In Today’s Decision
The 25bps rate hike is probably priced in. However, traders need to look at the votes. Estimates points to 6 vs. 3 in favor to raise rates, while QE is expected to remain on hold with a total of 445B.
The votes will be the key, for today, an anonymous vote would be the best case scenario for Pound but for a limited time, as we also need to look at the Bank of England assessment and possible decisions over the next few months, is it one and done? Or it’s a real tightening cycle.
If its one and done, this would increase the risk for a notable selloff and vise versa.
GBPUSD Levels To Watch
The British Pound have been trading within a tight range since the beginning of the week, supported by a short term trend line. However, it failed to break above 1.33 multiple time over the past 4 weeks.
Yesterday’s close formed a shooting star, which keeps the possibility for another leg lower, especially that the US Dollar index technical outlook is still bullish as well.
Any leg lower over the coming hours might continue toward 1.31 and 1.3060’s which represents its trend support. Only a close below that support would change the current outlook to bearish, with a possibility to retest 1.28 over the next few weeks.
On the upside view, a break above 1.33 would be the key for further gains, possibly toward 1.3360 followed by 1.3440, maybe 1.35.
Edited by:
Nour Eldeen Al-Hammoury
Market Analyst
