British Pound trims losses but remains below 1.3300 with all eyes on the UK budget

GBP/USD picks up from two-week lows at 1.3275 but remains below 1.3300, on track for a four-day reversal.
Investors remain wary ahead of the release of UK Chancellor Healey's budget.
In the US, the Fed is expected to leave interest rates on hold, and investors will be attntive for hints of a December hike.

Guillermo Alcala FXStreet

The British Pound (GBP) is heading south against the US Dollar (USD) for the fourth consecutive day on Wednesday, with investors awaiting the release of the UK budget and the US Federal Reserve’s (Fed) monetary policy decision, both due later in the day. The GBP/USD pair has reached a fresh two-week low at 1.3275, before picking up to 1.3295 at the time of writing.

In the UK, the highlight of the week is the release of the first budget of Prime Minister Andy Burnham’s cabinet, with the main focus on the plans to finance the tax exemptions announced by the cabinet to ease British citizens’ cost of living.

Markets remain wary, with the UK’s public finances strained as total public debt surpassed GBP 3 trillion in September, amid a significant increase in net borrowing. The previous chancellor, Rachel Reeves, left a GBP 23.6 billion buffer, but the surge in debt costs is likely to have eaten up approximately half of it. With bond markets jumpy, and the 2022 Liz Truss fiasco still fresh, the details of Chancellor Healey’s budget are likely to trigger some Pound volatility.

Dollar support seen as focus shifts from AI jitters to FOMC risk

In the US, the Fed is widely expected to leave interest rates on hold, but the question is whether Chairman Kevin Warsh will support market expectations of another rate hike in December, considering his distaste for forward guidance.

Strategists at ING note that “a little stability on the AI side has allowed the FX market to re-focus on the clearer and more present danger of higher energy, higher inflation and the central bank response,” which is boosting speculative demand for the Greenback.

Regarding the Fed, ING states that they “suspect Chair Warsh will not want to tie himself in knots by citing a tightening in financial conditions, having learnt from the unruly market response to his press conference in July.” Instead, they expect that a “focus on restoring monetary stability should remain the dominant message and keep the dollar supported.”

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).

Economic Indicator

FOMC Press Conference

The press conference is about an hour long and has two parts. First, the Chair of the Federal Reserve (Fed) reads out a prepared statement, then the conference is open to questions from the press. The questions often lead to unscripted answers that create heavy market volatility. The Fed holds a press conference after all its eight yearly policy meetings.

AUD/USD jumps to 0.7050, fresh one-month top after hot Australian CPI

AUD/USD attracts buyers for the second straight day on Wednesday, rising to a fresh high since September 23 during the Asian session. A hot Australian CPI print reaffirmed bets for an imminent RBA rate hike in November and boosted the Australian Dollar. Meanwhile, the US Dollar pauses after a three-day rally to a near two-week high ahead of the crucial FOMC rate decision, lending additional support to the currency pair.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold sticks to intraday losses below $4,050 as USD retains bullish bias ahead of FOMC

Gold remains offered below $4,050 during Wednesday's early European session, snapping a two-day winning streak ahead of the key central bank event. The US Federal Reserve is scheduled to announce its policy decision later today and is widely expected to keep rates unchanged. Meanwhile, the focus will remain on the accompanying monetary policy statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference.

Zcash's bullish momentum mounts on steady ETF inflows, retail confidence

Zcash extends steady recovery above $1,300 on Wednesday, approaching a key resistance near $1,373. Grayscale’s ZEC-focused Exchange-Traded Fund sees persistent buying pressure, with six straight days of inflows, including more than $3 million on Tuesday.

BoC expected to raise interest rates to 2.50%

The Bank of Canada is expected to raise its benchmark interest rate by 25 basis points to 2.50% on Wednesday, as persistent inflation concerns put pressure on policymakers to tighten monetary policy despite growing signs of economic weakness. According to a Reuters poll, 19 of 34 economists anticipate a rate hike, which would mark the central bank's first increase since July 2023.

Anthropic pledged $270 billion to Amazon, Google, and Microsoft. Here's who actually gets paid

Anthropic owes Amazon, Google, and Microsoft at least $269.4 billion for computing power, even if it uses less. All three sell its models and handle its billing, and Amazon and Google own stakes and lend it money, so they get paid regardless of how the IPO goes. The Dario Amodei-led Anthropic filed its initial public offering (IPO) on Monday, seeking a listing on the Nasdaq under the ticker ANT.