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Risk-takers did NOT like the idea of the FOMC gang possibly raising rates earlier than they had discussed.

Did yesterday’s selloff provide a buying opportunity for GBP/USD?

Before moving on, ICYMI, yesterday’s watchlist checked out USD/CAD’s short-term downtrend ahead of the FOMC meeting minutes. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Upcoming Potential Catalysts on the Forex Economic Calendar:

US ADP report showed 807K additional jobs vs 400K forecast in Dec, the most in seven months

Canada building permits up by 6.8% in Nov after 2.4% uptick in Oct

EIA: U.S. crude stockpiles drop by 2.1M barrels, but fuel builds sharply as demand dips

UK PM Boris: no need to “shut down our country again,” sticks to Plan B restrictions to ride out Omicron wave

FOMC meeting minutes hint members’ willingness to raise interest rates earlier than expected

China’s Caixin services PMI improves from 52.1 to 53.1 in Dec

Italy extends COVID vaccine mandate to everyone over 50

Foreign demand pushes Germany’s factory orders 3.7% higher in Nov vs. -5.8% in Oct

Upcoming Potential Catalysts on the Forex Economic Calendar:

Eurozone’s PPI at 10:00 am GMT
U.S. Challenger job cuts at 12:30 pm GMT
Canada’s trade balance at 1:30 pm GMT
U.S. initial jobless claims at 1:30 pm GMT
U.S. ISM services PMI at 3:00 pm GMT
U.S. factory orders at 3:00 pm GMT
Japan’s cash earnings and household spending at 11:30 pm GMT
Tokyo’s core CPI at 11:30 pm GMT
Switzerland’s unemployment rate at 6:45 am GMT (Jan 7)
Germany’s industrial production at 7:00 am GMT (Jan 7)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: GBP/USD

GBP/USD 1-hour Forex Chart
GBP/USD 1-hour Forex Chart

In case you missed it, the Fed’s December meeting minutes showed the FOMC gang not only talking about shrinking their balance sheet faster than what they initially agreed on, but also maybe raising rates sooner than expected!

The discussion spooked risk-takers who worried that the aggressive “quantitative tightening” would choke the already rocky global economic recovery.

GBP/USD was among the high-risk currency pairs that got knocked down a bit. It probably would’ve been dragged lower, though, if not for UK PM Boris Johnson all but rejecting another round of restrictions in favor of waiting out the Omicron variant.

That’s right! It looks like the U.K. government is staying away from more restrictions. For now.

The U.K.’s lack of fresh restrictions puts GBP/USD in a position to rise at the earliest signs of risk-taking in the markets. It also doesn’t hurt that Cable is a few pips away from the trend line and 200 SMA support on the 1-hour chart.

Let’s see if today’s U.S. ISM services PMI turns into a “good news is bad news” situation for risk-friendly currencies. Markets see a slight slowdown in the services industry but a much better than expected report would give the Fed members confidence to push through with their “quantitative tightening” plans.

If today’s market themes encourage risk-taking, however, then GBP/USD could bounce from the 200 SMA zone and retest its January highs ahead of tomorrow’s U.S. NFP report release.