Sterling was under renewed pressure against the Dollar during late trading on Wednesday as sellers exploited the hawkish FOMC meeting to send the GBPUSD to fresh two week lows at 1.2507. The ongoing Brexit uncertainty this quarter has made it increasingly difficult for Sterling to maintain gains while Dollar’s explosive rebound from the rising prospects of further US rate hikes in 2017 could expose the GBPUSD to steeper losses.

Investors may direct their attention towards the looming Bank of England policy meeting which is widely expected to conclude with rates kept unchanged at 0.25%. With uncertainty rising over the UK’s economic outlook and fears heightened of inflation shocks eroding consumer spending, the Bank of England could adopt a dovish stance with the overall tone downbeat. Although the latest domestic economic data from the UK continues to suggest that the economy has displayed resilience against the Brexit woes, the mounting uncertainty over what may occur after  Article 50 is invoked in March has weighed heavily on sentiment consequently leaving Sterling vulnerable.

Since the vote to leave the European Union back in June the Pound has struggled to fully recover from the losses with prices following a healthy downtrend on the weekly and monthly timeframe. From a technical standpoint, the GBPUSD is bearish and solid breakdown below 1.2500 could encourage sellers to send the pair lower towards 1.2300.

Fed Hawks are back in town

Investors who were expecting the final weeks of trading before Christmas to conclude on a quiet note received a shocker on Wednesday following the firmly hawkish FOMC meeting which sent shockwaves across the financial markets. Although it was widely expected that US interest rates would be increased by 0.25% amid stronger economic growth, the aggressive hiking path for 2017 which was somewhat reminiscent of the promises made by the Fed in December’s 2015 policy sent the Greenback to fresh 14 year highs. While there still remains a cloud of uncertainty over how economic policy may change under Trump’s presidency, the same rising optimism towards Trump boosting US growth through tax cuts and infrastructure spending may have played a key part in the changes to the Fed’s projections. With the Fed displaying optimism over the rise in job gains in recent months and unemployment rate steadily declining, the overall outlook for the world’s largest economy continues to look encouraging. Dollar strength could become a key theme in 2017 as the improving sentiment towards the U.S entices bullish investors to propel the Greenback higher.

From a technical standpoint, the Dollar is heavily bullish on the daily timeframe with yesterday’s hawkish surprise sending the Dollar Index to fresh 14 year highs above 102.50. The previous resistance around 102.00 could transform into a soft support that encourages a further incline higher towards 103.00.

Commodity spotlight – Gold

Gold descended to its lowest level in over 10 months at $1310 during trading on Thursday as a strengthening Dollar, caused by the US interest rate increase, encouraged sellers to attack. The prospects of higher rates in the world’s largest economy and a rising Dollar could leave this zero-yielding metal under renewed pressure. From a technical standpoint, prices are extremely bearish on the daily timeframe as there have been consistently lower lows and lower highs. The breakdown below $1140 could open a path lower towards levels not seen since January 2016 at $1150.