- The FOMC leaves rates and bond purchases unchanged, the dollar under pressure.
- GBP / USD has completed a 38.2% Fibonacci retracement of the early European session from 1.3001 to 1.3135.
After the flexibility of the Bank of england, which will continue to weigh on the British pound, the Federal Reserve’s decision on interest rates did not surprise anyone.
The FOMC left rates and bond purchases unchanged. The result was completely expected.
However, the emphasis is on easing and the additional stimulus required from the US government, which is pushing the dollar lower this week.
The DXY is on its way to a new low for the day, trading at 92.6270 versus the low of 92.4880.
The statement of the Federal Open Market Committee has practically not changed, with only a minimum of adjustments in its note on economic activity.
The FOMC has said that economic activity and employment have “continued to recover” versus “rebound” in the previous statement.
BoE surprises but raises GBP
Earlier in the day, the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to keep its bank benchmark rate at 0.1%, as expected.
However, the changes in its economic and quantitative easing forecasts within the Monetary Policy Report (MPR) were capturing the market’s attention.
The MPC stated that it was responding to rapidly rising COVID infection rates and subsequent restrictions across the UK.
The impact of the lockdown is substantial and justified the MPC’s steps to increase its Asset Purchase Program by £ 150 billion to a total of £ 895 billion, exceeding most market expectations of just a 100,000 increase. million pounds sterling.
The program will run until the end of 2021, beyond the summer that markets anticipated.
However, instead of seeing a drop in the pound, it actually rebounded when the USD sank.
We have seen a jump in the risk exchange rate due to the US elections which sent GBP / USD to rise above 1.3100 at the close of UK trading and the NY trade.
“Additional support to the economy and the broader global rise in risk sentiment made the pound perform strongly, particularly against a weaker dollar,” Westpac analysts explained.
” Forex market attention remains firmly focused on US political developments. We think it may be difficult for GBP / USD to break out of familiar ranges until more clarity emerges there, ” TD Securities analysts argued.
GBP / USD technical analysis
In an hourly bullish technical environment, GBP / USD has completed a 38.2% Fibonacci retracement at the start of the European session from 1.3001 to the high of 1.3135.
The pound could therefore extend for a full test of the psychological round number 1.3150 where the Fibonacci -0.272% of the correction points.
However, on failures at this current resistance, the slide is in play below 1.3100 and 1.3070 and towards yesterday’s mid-afternoon New York high around 1.3040.
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Credits: Forex Street
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