GBP and USD: Theresa May's Little Win. What to expect from the Fed decision on interest rates

The British pound fell slightly against the US dollar amid the emerging downward correction after the British Parliament yesterday opposed a proposal to postpone the Brexit date for 9 months, unless an agreement is reached by February 26. Thus, the Brexit agreement must be approved by the two parties before the end of March of this year, otherwise uncontrolled withdrawal, which many fear, may occur.

On the positive side, it can be noted that the Parliament approved the amendment, which excludes a tough Brexit and also spoke in favor of an alternative solution to the problem of the border with Ireland. Approval of the current amendments will help market participants who consider the UK's exit from the EU to be the least likely event without a bilateral agreement with Brussels.

All anything, but one approval by parliament is not enough. Now the British Prime Minister Theresa May needs to convince the EU leaders of this, who have repeatedly said that they would not, under any circumstances, make changes to the current agreement, which was developed last year. The direction of the British pound will depend on whether May succeeds in making changes or not.

As for the EUR / USD currency pair, yesterday's weak data on US consumer confidence, which fell for the third consecutive month in January of this year, led to a decline in the US dollar against the euro.

According to the Conference Board report, the consumer confidence index in January was 120.2 points against 126.6 points in December. Economists had expected the index to be 124.0 points in January. The decline in expectations was directly related to the volatility in financial markets, as well as the suspension of the US government.

Fed and interest rates

Today, it is necessary to pay attention to today's important decision of the Federal Reserve System on interest rates, on which the future direction of the US dollar will depend. Most likely, the Fed will be more cautious about monetary policy due to the fact that the risk of a slowdown in the US economy has seriously increased lately, and volatility in financial markets has only calmed down after the December tightening of monetary policy. Fed Chairman Jerome Powell has repeatedly pointed out that the Fed will be patient and flexible in its decisions. Most likely, under current economic data and conditions, one can count only on one rate increase this year, which is expected no earlier than autumn.

As for the technical picture of the EUR / USD currency pair, the bulls require the same breakthrough of resistance 1.1450, which will lead to the resumption of the trend growth of risky assets in the maximum areas of 1.1490 and 1.1530. In the case of a downward correction, which can be formed after the release of a good report on US GDP, the bulls will return to the market only from large supports around 1.1370 and 1.1330.