The Impact of Economic Data on GBP/USD
GBP/USD is trading above 1.3200 on Wednesday, driven by key economic data releases and market expectations.
Annual Core CPI Data
- Annual core CPI rose at a stronger pace than expected in August.
- The UK’s Office for National Statistics reported that core CPI, excluding volatile food and energy prices, increased by 3.6% year-on-year.
- This exceeded analysts’ estimates of 3.5% and indicated a potential uptrend in inflation.
Federal Reserve Policy Expectations
- The Federal Reserve is anticipated to lower the policy rate following the September meeting.
- Market sentiment suggests a 61% probability of a 50 basis points (bps) rate cut and a 39% chance of a 25 bps cut.
- The outcome of the Fed’s decision could significantly impact the USD and GBP/USD exchange rate.
Technical Analysis of GBP/USD
The Relative Strength Index (RSI) on the 4-hour chart indicates a bullish bias for GBP/USD.
Key Levels to Watch
- Resistance levels: 1.3260, 1.3300, 1.3340
- Support levels: 1.3200, 1.3150-1.3140, 1.3100
Fed FAQs
Understanding Federal Reserve Policy
- The Fed’s primary mandates are to achieve price stability and foster full employment.
- Interest rate adjustments are the Fed’s primary tool to achieve these goals.
Policy Meetings and FOMC Decisions
- The Federal Open Market Committee (FOMC) holds eight policy meetings a year.
- Decisions on monetary policy are made based on economic conditions and projections.
Quantitative Easing and Tightening
- Quantitative Easing (QE) involves increasing the flow of credit in the financial system.
- Quantitative Tightening (QT) is the reverse process, where the Fed reduces its bond holdings.
Analysis of GBP/USD Movement
The positive economic data and expectations surrounding the Federal Reserve’s policy decisions have contributed to GBP/USD trading above 1.3200. Traders are closely monitoring the Fed’s announcement for insights into future rate cuts and economic projections. The technical analysis suggests a bullish bias for GBP/USD, with key resistance and support levels identified. Understanding the impact of economic data and central bank policies is crucial for investors to navigate the currency markets effectively and make informed trading decisions.