The British Pound has remained within a clear trading range against the United States Dollar since mid-December, showing no signs of breaking out just hours before the Federal Reserve’s first monetary policy statement of the year. With the Bank of England’s own interest-rate decision scheduled for the following day, market focus is on whether the central banks signal readiness for policy adjustments later in the year.
While neither central bank is expected to alter its policy settings, the market is keen to gauge their stance on potential future changes. The Federal Reservesdpound has managed inflation more effectively than the Bank of England, but signs suggest that prices are gradually coming under control in both economies. The possibility of this being the first policy meeting since 2011 without any UK rate-setter advocating for tighter credit is considered, and there is speculation about a potential leaning towards a rate cut, although not anticipated in the immediate future.
The primary risk lies in the potential disappointment if both central banks do not express eagerness to ease rates. The US economy continues to expand, while the UK remains comparatively weaker, with inflation significantly above the target. The market may not witness substantial movement in GBP/USD unless one of the central banks diverges from expectations. The decision to hold rates is already factored into the current pricing, leaving the market in a waiting mode.
GBP/USD finds itself in a trading range between the late December peak at 1.28247 and the first Fibonacci retracement at 1.26365, a level derived from the rise to the four-month peak in early October. Strong support is evident at the psychological level of 1.26, where the market has rebounded twice in the past month. To attempt another move towards the range top, Sterling bulls would need to surpass the intraday top of 1.27764 from January 24.
Although the current momentum may not support an immediate attempt at the range top, GBP/USD is trading at a relatively high level in recent standards. The market’s expectation that the Federal Reserve might cut rates earlier and more aggressively than the Bank of England contributes to this scenario. If this sentiment continues after the central bank meetings, the Pound could experience a notable upward movement.
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