GBP/USD faces pressure drops beneath 1.2700 ahead of Fed and BoE’s decisions

The GBP/USD is under pressure amid a busy week in the economic calendar, with central bank decisions on the line, led by the US Federal Reserve (Fed) and the Bank of England (BoE). The major is trading at 1.2681, down 0.17% after hitting a daily high of 1.2718.

Sterling slumps below the psychological 1.2700 with central bank decisions looming

The financial markets are in waiting mode, with a strong week ahead that will gain traction on Wednesday. The Fed is expected to keep rates unchanged, though most analysts are expecting Fed Chairman Jerome Powell's press conference, who delivered ultra-dovish remarks in December. That sponsored a pushback by other Fed officials, and traders need to be aware there would be no projections or dot-plots revealed until the March meeting.

In the meantime, there’s a 50% chance the Fed will cut rates by 25 basis points in the next meeting. May’s decision is gathering traction, according to the CME Fed Watch Tool. The chance of a 24 basis point rate cut is 51.3%, while 50 bps lies at 36.9%. That said, Powell’s press conference on Wednesday could rock the boat, and we could see an adjustment of the expectations.

Aside from this, the Bank of England will host their first Bank Rate decision on Thursday, with most analysts expecting a unanimous decision of 9-0 to hold rates, with the BoE releasing their latest economic projections and Andrew Bailey’s press conference.

According to the Commitment of Traders report, speculators increased their net long Sterling position to $2.49 billion, the biggest in four months. That could mean GBP/USD traders are bracing for some upside soon. Despite that, speculation sees a 50% chance of a rate cut by the BoE in May.

Ahead of the week, the UK economic docket will feature the BoE Consumer Credit report. On the US front, JOLTs Job Openings and the Conference Board (CB) Consumer Confidence would update the status of the economy.

GBP/USD Price Analysis: Technical outlook

The daily chart portrays the pair as neutral biased, having fallen for three straight days, piercing the 1.2700 mark. For sellers to remain in the driver’s seat, they must push crack the 50-day moving average (DMA) at 1.2659. That would open the door to challenging the psychological 1.2600 level, followed by the 200-DMA at 1.2555. On the other hand, if GBP/USD bulls step up and lift the exchange rate past 1.2700, they could remain hopeful of challenging last Friday's high at 1.2758. Up next would be 1.2800.