- GBP remains under pressure amid a lack of key UK data, with focus shifting to the upcoming Fed rate decision.
- Markets expect the Fed to hold rates steady, with potential cuts anticipated later in the year.
- Investors look to Fed Chair Powell's press conference for insights into future monetary policy direction.
The Pound Sterling (GBP) continued to weaken on Wednesday, with GBP/USD falling to 1.2406, down 0.27%, as the US Dollar (USD) remained firm ahead of the Federal Reserve's (Fed) monetary policy decision. With no major UK economic data releases, traders are eyeing Bank of England (BoE) Governor Andrew Bailey's TSC hearing, which could provide market-moving insights ahead of the Fed's announcement.
Markets Brace for Fed Decision and Powell's Remarks
Risk sentiment has slightly improved, but caution prevails ahead of the Fed's decision. Money markets assign a 98% probability that the Fed will keep rates unchanged, with expectations of two rate cuts in 2025 - one in June and another later in the year.
Investors are also closely watching Fed Chair Jerome Powell's press conference for insights into the central bank's policy stance. According to Brown Brothers Harriman (BBH), Powell is expected to reiterate a cautious approach, emphasizing that the Federal Open Market Committee (FOMC) will remain data-driven in future policy adjustments.
Meanwhile, US economic data released on Tuesday showed Core Durable Goods Orders slightly improving. Following the data, the Atlanta Fed's GDPNow model revised Q4 2024 GDP growth projections to 3.2% from 3%, signaling resilient economic momentum.
In broader markets, sentiment stabilized after DeepSeek unveiled its latest AI model, which is reportedly cheaper and more efficient than OpenAI's competitors, easing concerns over technology sector competition.
GBP/USD Technical Outlook: Daily Chart
GBP/USD remains under pressure, dropping to a three-day low of 1.2392.
A break below 1.2400 could open the door for further losses toward the January 22 peak of 1.2375, followed by 1.2350.
Bearish momentum is evident, as indicated by the Relative Strength Index (RSI) trending lower.
Short-Term (Hourly) Chart:
GBP/USD is trading below the 50 and 100 Simple Moving Averages (SMAs), confirming bearish sentiment.
A drop below 1.2400 could expose the 200-SMA at 1.2353, signaling further downside risk.
On the upside, a break above 1.2431 (100-SMA) and 1.2446 (50-SMA) could support a short-term rebound.
Traders will closely monitor Fed Chair Powell's comments at 18:30 GMT, which could set the tone for GBP/USD's next move.
