The Fed, as anticipated, voted to cut rates by 25 basis points indicating doubt about the economic outlook and sub 2% inflation growth. However, Fed Chairman Jerome Powell said the rate cut is not necessarily the start of an easing cycle.
Meanwhile, the ADP employment report revealed that the U.S. economy appended 156,000 private jobs in July (vs +150,000 assumed, +112,000 in June). The Chicago PMI sank to 44.4 in July (vs 51.0 anticipated) from 49.7 in June.
Looking ahead into the economic calendar, the Bank of England’s monetary policy remains at the top.
Economic Events to Watch Today
GBP – UK Rate Decision
The BOE not only delivers its rate decision and meeting minutes but also announces its Quarterly Inflation Report (QIR) and accommodates a press conference led by Governor Mark Carney. The BOE has been appropriating a smooth Brexit and has shown its eagerness to raise rates amid a bustling economy and particularly a booming labor market. This may all turn now.
The new Johnson government appears enthusiastic on a hard Brexit. Furthermore, central banks across the globe have been shifting their hawkish biases, flagging rate cuts, or cutting rates outright. The UK decision arrives less than 24 hours later, the Fed, and Carney and co. are expected to follow by removing their aim to boost rates. Nonetheless, the pound has previously been suffering and may jump on a “buy the rumour, sell the fact” response.
EUR/USD – Daily Outlook
The EUR/USD currency pair touched the track of the 26-month low; risk reversals slide on put demand. Today in the early market, the EUR/USD currency pair trading at the defensive track, due to the release of the less dovish rate cut by the Federal Reserve yesterday.
The EUR/USD currency pair is presently trading at 1.1046, having hit a bearish track of 1.1034 a few minutes before press time. It was the lowest level since May 2017.
On the flip side, the greenback is touching the bullish track and found strong buying pressure during the day, due to the U.S. Federal Reserve cut rates by 25 basis point yesterday, but unfortunately, shattered sentiments of additional easing by relating to the rate cut ahead of mid-cycle adjustment.
Daily Support and Resistance
Pivot Point 1.115
EUR/USD – Trade Tips
The EUR/USD pair sustained around 1.1040 on European opening, offering a bearish perspective in the short-term, as, in the 4 hours chart, it broke below its 20, 25 and 50 periods EMA.
Furthermore, technical indicators have turned dipped in the red, retaining their downward slopes and with the RSI currently at 27. The mentioned low is the immediate support, en route to the 1.1000 critical figure. Consider staying bearish below 1.1060 to target 1.1000 today
GBP/USD – Daily Outlook
The GBP/USD currency pair falls to lowest since January 2017 due to BOE policy decision. The GBP/USD currency pair hit the bearish track of thirty-one-month low of 1.21, due to broad-based greenback demand. The GBP/USD currency pair was falling 0.3% to 1.2125.
The greenback currency picked up a bid due to the U.S. Federal Reserve cut rate by 25 -basis points, but warned markets against expecting additional easing in the upcoming months.
On the other hand, the Bank of England is broadly expected to force back against rate cut expectations despite the fear of hard Brexit. Meanwhile, the monetary policy of central banks is expected to vote 9-0 to keeps rates stable at 0.75%.
Probably, the GBP currency will pick up a bid if the Bank of England repeats the message which is delivered in May that the markets are minimising the Bank of England’s willingness to increase rates if the economy developed.
Daily Support and Resistance
Pivot Point 1.2157
GBP/USD – Trading Tips
The GBP/USD pair surged to complete 23.6% retracement at 1.2215 but reversed before completing 38.2% retracement at 1.2275. I will consider staying bearish below 1.2130 to target 1.2075 today. All the best!