The main theme of today's forex session is the Fed and BoE decisions. Both banks and their top officials will decide on interest rates today, with both forecast to cut rates by 25 basis points. What is the probability of such decisions? At this point, the money market estimates such outcomes at nearly 99.8% for the Fed and 96% for the BoE.
However, bankers need to assess the significantly changed economic landscape since their last decision in September. Since then, the fiscal plans of the new U.K. government and Donald Trump's victory in the U.S. election have helped push 10-year yields up by about 65 bps. Thus, it seems that in the case of the BoE, the decision to cut rates will not be unanimous and will give space for relatively hawkish comments in the announcement. However, this does not change the fact that inflation and wage growth have continued to slow down since the last BoE meeting, which gives room for cuts.
For the Fed, the situation is complicated by the election. Investors want to know how President-elect Donald Trump's proposed fiscal and tariff policies will affect the FOMC's interest rate outlook. If Republicans are to take control of the White House, and possibly both chambers of Congress, we believe several Fed bankers will call for restraint, pushing for a more gradual pace of interest rate cuts.
The GBPUSD pair has negated the overall uptrend that has been creating since April of this year, thus creating uncertain ground for today's FED and BoE decisions. For the moment, it seems that the important support point remains the area of the 50-day EMA (blue curve) in the region of 1,304, where we have seen a double retest. Local support, meanwhile, remains the 200-day EMA (gold curve on the chart).
Source: xStation
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