GBP/USD trades near month lows around 1.3650 ahead of FOMC meeting

GBP/USD is declining for the third day in a row, down 0.61%, trading at 1.3657 at the time of writing.

The market sentiment remains downbeat as Chinese real estate developer Evergrande scrambles to fulfill its bond interest payments due this week, triggering a global sell-off of everything that has the “risk” word attached to it. Additionally, the possibility of a Federal Reserve announcement of reducing its bond asset purchases this week also weighed.

Meanwhile, the US Dollar Index, which measures the buck’s performance against a basket of six currencies, is flat, sitting at 93.24.

Central banks of both countries will hold their monetary policy meetings, this week

In the US, the Federal Reserve will meet on September 21-22 to discuss monetary policy. On Wednesday will release its Summary of Economic Projections and the monetary policy statement, expected to keep the interest rates unchanged. The highlight of the meeting will be the QE’s reduction. If there is some sort of announcement on the statement, it could be positive on the US dollar, negative for the British pound, as most investors expect the Fed to reveal its bond taper intentions in the November meeting. 

Meanwhile, in the UK, the Bank of England will meet on September 23. In the last meeting, Michael Saunders voted to finish the bank’s bond purchasing program, but most MPC members kept the pace unchanged.

Concerning a raise of interest rates, the BoE’s Governor Andrew Bailey commented that four out of eight MPC members thought some initial conditions had been met to raise rates to explore the possibility of raising interest rates. Nevertheless, this seems remote by investors, as the market expects a rate hike by 2022.

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