Yesterday, as expected, the FOMC raised the rate from 0.50% to 0.75%.
As a result, the cable lost 90 points. Perhaps GBP/USD could lose even more, but the US data, which were published during the day, were too weak. In November, the industrial production declined by 0.4% vs. -0.2%. With such a data we have some doubts talking about the recovery of the industrial production in the US.
Let's turn our attention to the FOMC meeting.
Increased rates were approved unanimously. The next year, FOMC is planning to increase the rate, not two times as investors expected. The FOMC expects to have three rate hikes, that is, to 1.50%. In our view, even if the Fed wants to increase the rate three times, it won’t have time to do it to the beginning of the crisis. Some investors consider this statement as the joke, cause, in fact, this year the Fed planned to have 4 rate increases, but only got one.
The economic forecasts of the Federal Reserve are also very optimistic: the GDP growth was raised from 2.0% to 2.1% for next year. The unemployment rate seems to be 4.5%. The forecast for inflation remains unchanged: 1.9% next year and reaching 2.0% in 2018.
Today the US will present NY Empire State Manufacturing index which is expected to increase from 1.5 to 3.2. The Philadelphia Fed Manufacturing index is expected to rise from 7.6 to 9.1. The consumer price index is expected to grow by 0.2%, the core CPI is also expected to increase by 0.2%.
In the UK, the retail sales are expected to grow by 0.2% in November. The decision of the Bank of England's will be the main event for the pound today. The changes aren’t expected. The minutes from the last BoE meeting also won’t give any surprises.
How to trade binary
The short-term downward movement is possible in the range of 1.2524 - 1.2492, the breakout of the lower limit should be accompanied by the movement to the level of 1.2414. The short-term upward movement is possible in the range of 1.2564 - 1.2613. We would buy Put options if the pair GBP/USD goes below 1.2524. This scenario would be invalidated if the pair goes above 1.2664, in which case we go for Call option with the end of the expiry.
Target price: 1.2524
Expiry time: 21:00 GMT