- The Pound Sterling struggles around 1.3000 against the US Dollar ahead of the Fed’s monetary policy decision, dot plot, and economic projections.
- Investors expect the Fed and BoE to keep interest rates steady this week.
- Market sentiment remains cautious as US President Trump is poised to impose reciprocal tariffs on April 2.
The Pound Sterling (GBP) struggles to extend the rally above the key level of 1.3000 against the US Dollar (USD) in European trading hours on Wednesday. The GBP/USD pair trades cautiously ahead of the Federal Reserve’s (Fed) monetary policy decision at 18:00 GMT.
According to the CME FedWatch tool, the Fed is certain to keep interest rates unchanged in the range of 4.25%-4.50% for the second time in a row. Therefore, the major catalyst for the US Dollar will be the Fed’s dot plot, which shows where policymakers see the Federal funds rate heading in the medium and longer term, and the Federal Open Market Committee’s (FOMC) Summary of Economic Projections (SEP).
It would be interesting to know whether Fed officials will see easing inflationary pressures and declining consumer confidence in the current scenario or accelerating consumer inflation expectations due to United States (US) President Donald Trump’s economic policies while forecasting the monetary policy outlook. In February, the annual core Consumer Price Index (CPI) – which excludes volatile food and energy prices – rose by 3.1%, the lowest level seen since April 2021.
According to analysts at Fitch, tariff shocks are estimated to “accelerate inflationary pressures by one point percent” in the near term. This scenario will discourage Fed officials from cutting interest rates before the last quarter of the year. Meanwhile, the CME FedWatch tool shows that the Fed will cut interest rates in the June meeting.
Daily digest market movers: Pound Sterling remains on toes ahead of BoE policy, UK employment
- The Pound Sterling trades with caution against its peers ahead of the United Kingdom (UK) labor market data for the three months ending January and the Bank of England’s (BoE) monetary policy decision, scheduled for Thursday. Investors will pay close attention to the Average Earnings data, a key measure of wage growth that has contributed significantly to the high inflation in the services sector.
- UK’s leading global provider of people data, analytics, and insight firm Brightmine showed on Tuesday that the pay growth has slowed as business owners are cautious before the implementation of an increase in payroll taxes from April. UK Chancellor of the Exchequer Rachel Reeves announced an increase in employers’ contribution to National Insurance (NI) from 13.8% to 15% in the Autumn Budget.
- Brightmine also said that a significant number of firms have planned a hiring freeze or team restructuring in response to the government’s decision to increase employers’ social security contributions, with some considering pay freezes and delays to increases, Reuters report. Meanwhile, economists expect Average Earnings (Excluding and Including) bonuses to have grown almost steadily by 5.9%.
- The BoE is expected to keep interest rates steady at 4.5%, with a 7-2 vote split. BoE Monetary Policy Committee (MPC) members Catherine Mann and Swati Dhingra are expected to support an interest rate cut, while the other seven policymakers will vote to keep rates unchanged. Investors will pay close attention to BoE Governor Andrew Bailey’s commentary on the UK economic outlook amidst US President Trump’s tariff policies.
- On Tuesday, US Treasury Secretary Scott Bessent confirmed in an interview with Fox Business that reciprocal tariffs would become effective on April 2. Bessent added that he is optimistic some of the tariffs may not have to go on because a deal can be “pre-negotiated” or that once countries receive their “reciprocal tariff number”, they will come to us and want to “negotiate it down”.
British Pound PRICE Today
The table below shows the percentage change of the British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.39% | 0.25% | 0.33% | 0.14% | 0.53% | 0.58% | 0.09% | |
| EUR | -0.39% | -0.14% | -0.05% | -0.24% | 0.15% | 0.20% | -0.30% | |
| GBP | -0.25% | 0.14% | 0.08% | -0.10% | 0.29% | 0.34% | -0.17% | |
| JPY | -0.33% | 0.05% | -0.08% | -0.21% | 0.20% | 0.22% | -0.26% | |
| CAD | -0.14% | 0.24% | 0.10% | 0.21% | 0.40% | 0.46% | -0.07% | |
| AUD | -0.53% | -0.15% | -0.29% | -0.20% | -0.40% | 0.04% | -0.42% | |
| NZD | -0.58% | -0.20% | -0.34% | -0.22% | -0.46% | -0.04% | -0.51% | |
| CHF | -0.09% | 0.30% | 0.17% | 0.26% | 0.07% | 0.42% | 0.51% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Technical Analysis: Pound Sterling holds key support of 1.2900
The Pound Sterling looks for a fresh trigger to extend its two-month rally above the key level of 1.3000 against the US Dollar on Wednesday. GBP/USD bulls take a breather as the 14-day Relative Strength Index (RSI) reached overbought levels above 70.00. However, this doesn’t reflect that the bullish trend is over. The upside trend could resume once the momentum oscillator cools down to near 60.00.
Advancing 20-day and 50-day Exponential Moving Averages (EMAs) near 1.2830 and 1.2690, respectively, suggest that the overall trend is bullish.
Looking down, the 50% Fibo retracement at 1.2770 and the 38.2% Fibo retracement at 1.2614 will act as key support zones for the pair. On the upside, the October 15 high of 1.3100 will act as a key resistance zone.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.
Next release: Wed Mar 19, 2025 18:00
Frequency: Irregular
Consensus: 4.5%
Previous: 4.5%
Source: Federal Reserve
Read the full article here