- GBP/USD is facing downward pressure ahead of the interest rate decisions from both countries.
- Fed is expected to maintain its current interest rates on Wednesday, but a quarter basis points hike is expected through the end of the year 2023.
- Investors expect BoE to increase interest rates by a quarter basis points in the upcoming meeting on Thursday
- BoE Governor Andrew Bailey suggested that the central bank is nearing the end of its current interest rate-hike cycle.
GBP/USD struggles to halt the two-day losing streak, recovering from the intraday losses and trading around 1.2380 during the European session on Monday. The pair is facing downward pressure ahead of the interest rate decisions from the United States (US) and the United Kingdom (UK).
The US Federal Reserve (Fed) is expected to maintain its current interest rates without changes in the upcoming meeting scheduled on Wednesday. Furthermore, market participants will carefully scrutinize the central bank's communications, seeking any clues or insights regarding the possible future direction of interest rates. The market is still factoring in a 25 basis points rate-hike through the end of year 2023.
The US Dollar Index (DXY), assesses the performance of the US Dollar (USD) against six other major currencies, hovering around 105.30 at the time of writing. The improved US Treasury yields could contribute upward support for the Greenback. The yield on the US 10-year bond has declined to 4.34%, up by 0.35% by the press time.
The Greenback faced downward pressure, which could be attributed to the release of downbeat consumer sentiment data from the United States (US) on Friday. The preliminary Michigan Consumer Sentiment Index for September showed a reading of 67.7, down from the previous figure of 69.5 and below the expected reading of 69.1.
The GBP/USD traders anticipate that the Bank of England (BoE) will raise interest rates by 25 basis points in the upcoming meeting on Thursday. This potential rate hike by the BoE is driven by the central bank's aim to tackle rising inflationary pressures and maintain economic stability in the United Kingdom (UK).
However, BoE Governor Andrew Bailey's statement suggests that the central bank is nearing the end of its current interest rate-hike cycle. This, combined with concerns about the possibility of a recession and evidence of a slowing labor market in the UK, could put pressure on the BoE to consider pausing or adjusting its rate-hiking cycle in the future.
Investors will likely watch the notable events scheduled ahead of the monetary policy decisions for the United Kingdom (UK), the Consumer Price Index (CPI), Core CPI, and Producer Price Index (PPI) for August will be published on Wednesday.
On the US docket, Building Permits will be eyed. Traders will closely monitor these data releases, seeking trading opportunities within the GBP/USD pair.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD remains flat below 0.6450, eyes on US PMI ahead of RBA rate decision
The AUD/USD pair trades sideways below the mid-0.6400s during the early Asian session on Monday. The Australian Dollar sell-off pauses due to the upbeat Chinese PMI data. However, the stronger UD Dollar might cap the upside of the pair.
EUR/USD weekly forecast: Optimism not enough to take the US Dollar down
The EUR/USD plummeted to 1.0487 on Wednesday, its lowest since early March, as investors continued to seek refuge in the US Dollar. Financial markets were in risk-averse mode following central banks’ monetary policy decisions from earlier in September.
Gold price weekly forecast: Technicals turn bearish ahead of key events Premium
Despite holding resilient in the face of a hawkish Federal Reserve outlook in the previous week, Gold price suffered heavy amid broad-based US Dollar strength and surging US Treasury bond yields. XAU/USD staged a modest rebound on Friday but ended up losing more than 2% for the week.
DOT confirms trend reversal, eyes retest of $5 after reclaiming key hurdle
Polkadot price seems to be ending its downtrend after shedding 92.91% in the last two years from its all-time high of $55.09. In the last three days, DOT has inflated by 3.3%, breaching a declining trendline and confirming the potential start of an uptrend.
Week ahead – Dollar shines ahead of Nonfarm Payrolls
Dollar cruises higher, nonfarm payrolls on Friday will be crucial for this rally. Early indicators point to another solid month for the US labor market. Central bank decisions in Australia and New Zealand will also be in focus.