- GBP/USD is oscillating in a narrow range below 1.2500 ahead of Fed policy and US private Employment data.
- S&P500 futures have added more losses in early Asia as anxiety among investors is deepening ahead of Fed policy.
- Higher chances of a 12th straight interest rate hike from the BoE have trimmed UK inflation expectations.
The GBP/USD pair is showing back-and-forth action in a narrow range below the psychological resistance of 1.2500 in the early Asian session. The Cable is demonstrating a volatility contraction, however, a power-pack action is expected ahead of the interest rate decision by the Federal Reserve (Fed) and the United States Automatic Data Processing (ADP) Employment data.
S&P500 futures have added more losses in early Asia as anxiety among market participants ahead of the Fed’s interest rate policy is deepening. An elevation in the risk aversion market mood is expected to impact risk-sensitive assets further.
The US Dollar Index (DXY) is making efforts for breaking above the immediate resistance of 102.20. An expectation of one more interest rate hike from the Fed is improving the appeal for the USD Index as safe-haven. Fed chair Jerome Powell is widely anticipated to announce a consecutive 25 basis point (bp) interest rate hike, however, investors will keep focusing on further roadmap for taming the sticky core Consumer Price Index (CPI).
Solid expectations for an interest rate hike from the Fed have heavily impacted demand for US government bonds. This has accelerated 10-year US Treasury yields to 3.57%.
Apart from the Fed’s interest rate policy, Wednesday’s US ADP Employment data will be keenly watched. As per the consensus, the US economy added 150K jobs in April lower than the former addition of 145K.
On the Pound Sterling front, soaring odds of a further interest rate hike from the Bank of England (BoE) have eased United Kingdom’s inflation expectations. BoE Governor Andrew Bailey is expected to raise interest rates straight for the 12th time to strengthen its defense against double-digit inflation. Citi said its monthly survey conducted by market research company YouGov showed public expectations for inflation in 12 months' time eased to 5.2% in April from 5.4% in March and expectations for five to 10 years ahead fell to 3.6% from 3.7%, as reported by Reuters.
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