GBP/USD slips below 1.3000 amid firm US Dollar ahead of Fed decision

GBP/USD inches lower as traders adopt caution ahead of the Federal Reserve’s policy decision due on Wednesday.
The Fed is expected to leave interest rates unchanged, highlighting persistent inflation concerns and economic uncertainty.
Traders anticipate the Bank of England will also maintain borrowing costs at 4.5%, with a likely 7-2 vote split.

Akhtar Faruqui FXStreet

GBP/USD edges lower, trading around 1.2990 during Asian hours on Wednesday after posting gains in the previous two sessions. The pair struggles as the US Dollar (USD) remains firm, supported by stable US Treasury yields ahead of the Federal Reserve’s (Fed) interest rate decision later in the day. Markets widely expect the Fed to hold rates steady amid persistent inflation concerns and economic uncertainty.

The US Dollar Index (DXY), which measures the USD against six major currencies, trades near 103.40. Meanwhile, yields on 2-year and 10-year US Treasury bonds stand at 4.04% and 4.29%, respectively, at the time of writing. However, the Greenback faced pressure from weak US economic data and renewed tariff threats from US President Donald Trump, adding to investor uncertainty.

Traders are closely watching the Fed’s updated economic projections for further clues on the future path of US interest rates. Any hawkish signals from Fed policymakers could strengthen the USD against its counterparts.

Adding to the political landscape, “The Wall Street Journal” reports that Trump has dismissed two Democratic Federal Trade Commission (FTC) commissioners. Uncertainty lingers over whether he has the authority to do so, fueling speculation about whether this move sets the stage for potential firings of Fed Chair Jerome Powell and other Federal Reserve members.

The Pound Sterling (GBP) trades cautiously as investors focus on the Bank of England’s (BoE) interest rate decision on Thursday. Markets widely expect the BoE to keep borrowing costs unchanged at 4.5%, with a likely 7-2 vote split.

BoE Monetary Policy Committee (MPC) members Catherine Mann and Swati Dhingra are expected to advocate for a rate cut. In the February meeting, both officials pushed for a larger-than-usual 50 basis-point (bps) reduction, while the majority favored a more conventional 25 bps cut.

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).

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold: Gains remain capped by $4,400

Gold regains composure and trades with decent gains on Friday, managing to refocus attention on the $4,440 mark per ounce troy. Therefore, the precious metal reverses Thursday’s decline as the US Dollar alternates gains with losses at the end of the week.

Ripple Price Forecast: XRP extends decline as returning ETF inflows fail to lift outlook

Ripple (XRP) falls below $1.33 on Friday, marking the third consecutive day of declines. The token continues to track the broader cryptocurrency market downturn, with investors closely monitoring heightened macroeconomic uncertainty ahead of the United States (US) Consumer Price Index (CPI) release and next week’s Federal Reserve (Fed) monetary policy decision.

Weekly focus – The hawks set the tone

Risky assets came under pressure this week as energy prices kept creeping higher and the ECB surprised the markets with a hawkish tone. The price of Brent crude touched USD 110 per barrel on Thursday night, highest since mid-May, as news emerged that the Yemeni Houthis had reached control of key port cities and islands near the Bab el-Mandeb strait.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.