- On Wednesday, the GBP/USD pair is trading with a weaker tone near the 1.2490 level.
- The US Federal Reserve is widely expected to maintain interest rates within the 5.25%–5.50% range for the sixth consecutive meeting today.
- The dovish sentiments expressed by the Bank of England are putting pressure on the Cable.
During the early Asian session on Wednesday, the GBP/USD pair remains below the 1.2490 mark. This decline is bolstered by the strength of the US Dollar (USD), reflecting a cautious sentiment ahead of the US Federal Reserve’s (Fed) upcoming interest rate decision.
Tuesday saw a downturn in key US economic indicators, with the US Conference Board’s (CB) Consumer Confidence falling to 97.0 in April from the previous reading of 103.1, marking the lowest level since July 2022. Similarly, the Chicago Purchasing Managers’ Index dropped to 37.9 in April from 41.4 in March, below the market consensus of 44.9, hitting its lowest level since November 2022. Conversely, the US Employment Cost Index (ECI) rose by 1.2% quarter-on-quarter in Q1 2024, surpassing estimates with a 1% increase.
Anticipation builds around the Fed’s decision to maintain rates for the sixth consecutive meeting, with JPMorgan and Goldman Sachs eyeing a potential first rate cut in July, while Wells Fargo projects a delay until September. According to the CME FedWatch Tool, market players now assess a 44% chance of a rate cut in September, down from 60% earlier in the week. All eyes will be on Fed Chair Jerome Powell’s Press Conference, where a hawkish stance could further strengthen the Greenback and weigh on the GBP/USD pair.
Conversely, the dovish outlook from the Bank of England (BoE) adds downward pressure on the Pound Sterling (GBP). BoE Governor Andrew Bailey remains optimistic about curbing inflation in the UK and notes market expectations for two or three rate cuts this year. Financial markets have priced in the first rate cut from the BoE in August, with expectations of a 50 basis point reduction.
GBP/USD
