- The Pound Sterling edges lower, trading near 1.3330 against the US Dollar, as markets await the Federal Reserve’s monetary policy statement.
- The consensus anticipates the Federal Reserve to maintain current interest rate levels, while the Bank of England is widely expected to implement a rate cut on Thursday.
- Developments in US-China trade negotiations are poised to be a significant catalyst for global market movements.
The Pound Sterling (GBP) is exhibiting cautious trading behavior, hovering around 1.3370 against the US Dollar (USD) during Wednesday’s North American trading session. The GBP/USD pair is experiencing slight downward pressure, coinciding with a period of USD consolidation in anticipation of the Federal Reserve (Fed) monetary policy announcement scheduled for 18:00 GMT. Market expectations overwhelmingly suggest that the central bank will hold interest rates steady, remaining within the existing range of 4.25-4.50%.
This forthcoming meeting is projected to mark the third consecutive instance where the Fed refrains from altering borrowing costs. This cautious approach reflects the prevailing uncertainty surrounding the potential economic ramifications of new policies enacted by United States (US) President Donald Trump. Several Fed officials, including Chairman Jerome Powell, have articulated that a “wait and see” strategy is prudent until greater clarity emerges regarding the extent to which these new policies will influence inflationary pressures and the broader economic trajectory. The Fed’s dual mandate of price stability and full employment is guiding this measured approach.
Recent data indicates that US consumer inflation expectations have risen, fueled by announcements from local business owners that they intend to pass on the costs associated with elevated import tariffs to consumers. This development presents a compelling argument for the Fed to exercise patience before implementing any adjustments to monetary policy. Furthermore, the sustained robustness of job growth, even in the context of Trump’s tariff policies, further constrains the Fed’s inclination to prematurely lower interest rates. The labor market’s resilience provides a buffer against immediate economic downturn, allowing the Fed to assess the longer-term impacts of current fiscal and trade policies.
Daily digest market movers: Pound Sterling pauses ahead of Bank of England policy decision
- The Pound Sterling is taking a breather on Wednesday, following a notable upward surge observed the previous day. The British currency maintains a generally firm stance against its counterparts, buoyed by ongoing discussions between the United Kingdom (UK) and the US regarding a potential bilateral trade agreement.
- A report published by the Financial Times (FT) on Tuesday indicated that both nations are nearing a trade accord. Under the proposed terms, the US would reduce tariffs imposed on UK steel and automotive exports. In exchange, the UK would lower tariffs on US automobiles and agricultural products, while also implementing modifications to its digital services tax framework.
- Looking ahead, the primary catalyst for movements in the British currency will be the Bank of England’s (BoE) forthcoming monetary policy decision, scheduled for announcement on Thursday. The prevailing expectation is that the BoE will reduce interest rates by 25 basis points (bps), bringing the benchmark rate down to 4.25%. If realized, this would represent the fourth interest rate cut implemented by the BoE within the current monetary easing cycle, which commenced in August of the preceding year.
- Investors will be keenly focused on the BoE’s forward guidance pertaining to monetary policy and its assessment of the economic outlook. Market analysts suggest that the BoE may signal a more aggressive policy-easing stance in response to the ongoing US-China trade dispute. Concerns persist that China may seek to redirect its exports towards other economies. Given China’s inherent cost advantages, the competitiveness of products originating from other nations could be diminished if Beijing intensifies its export efforts into the global market.
- Concurrently, the US and China have agreed to engage in trade discussions this week. US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer confirmed on Tuesday that they are scheduled to meet with their Chinese counterparts in Geneva for trade negotiations. This marks the first confirmed high-level meeting between representatives of the world’s two largest economies since the implementation of reciprocal tariffs and retaliatory duties by the US and China, respectively.
- Earlier in the week, Secretary Bessent indicated that Washington is keen to engage in trade talks with Beijing in the near term, citing the unsustainable nature of the current tariff regime. A favorable outcome from the US-China trade talks is anticipated to provide a boost to risk assets across the global financial landscape. A resolution to the trade tensions could unlock significant economic growth potential.
Technical Analysis: Pound Sterling maintains position above 1.3300
The Pound Sterling is consolidating Tuesday’s gains, trading around 1.3370 against the US Dollar on Wednesday. The overarching technical outlook remains bullish, supported by the upward trajectory of all short-to-long-term Exponential Moving Averages (EMAs).
The 14-day Relative Strength Index (RSI) is attempting to climb back above the 60.00 level. A renewed bullish impulse would be confirmed if the RSI successfully breaches this threshold.
On the upside, the three-year high of 1.3445 represents a significant resistance level for the GBP/USD pair. Conversely, on the downside, the April 3 high around 1.3200 is expected to serve as a robust support zone.
