GBP/USD whips but sees little momentum as markets digest middling Fed Powell comments

GBP/USD tested lower, but recovered to nearly flat on the day post-Fed.
Fed held rates steady as rate futures broadly anticipated.
Fed Chair Powell: the Fed doesn't act until seeing more than we see now.

Joshua Gibson FXStreet

On Wednesday, GBP/USD fluctuated, dipping below 1.2420 before rising back to 1.2450 as the ongoing battle between bulls and bears resulted in less-than-noteworthy intraday volatility. The Federal Reserve (Fed) kept rates unchanged, as expected by rate futures markets, with Fed Chair Jerome Powell emphasizing their data-driven strategy for rate modifications.

Chair Powell highlighted that the Federal Open Market Committee (FOMC) is monitoring the policies enacted by US President Donald Trump closely, but he confirmed that President Trump has not communicated directly with the Fed. As an independent federal entity, the White House exerts minimal influence over the Federal Reserve's policy directions. Additionally, Powell remarked that while inflation is gradually approaching the median target levels, the current economic conditions, alongside concerns regarding President Trump’s extensive trade policies, mean the Fed is not in a hurry to alter the restrictiveness of monetary policy rates.

Furthermore, rate markets have reduced their expectations for Fed rate cuts in 2025. Based on the CME's FedWatch Tool, rate futures markets anticipate no changes in the federal funds rate until at least June.

GBP/USD one-hour chart

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).

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.