GBP/USD clings to 1.2500 ahead of crucial Fed-BoE policy meetings

  • On Tuesday, GBP/USD posts minimal gains below the 1.2500 region.
  • GBP/USD remains confined to the 1.2410-1.2600 range ahead of the important Fed and BoE monetary policy meetings.
  • GBP/USD Price Forecast: Remain under pressure below 1.2600.

Amid an upbeat market mood, as illustrated by rising global equities, the GBP/USD posts modest gains, despite retreating from daily highs around 1.2567 towards the 1.2490 zone, ahead of key monetary policy announcements from the Federal Reserve and Bank of England. the first on May 4, while the second on May 5. At the time of writing, the GBP/USD pair is trading at 1.2504.

Weak US dollar and high UK yields a tailwind for GBP/USD

Wall Street’s record earnings in the North American session. In the currency space, broad US dollar weakness is keeping the greenback under pressure, as shown by the US dollar index, which is down 0.20%, currently at 103.406. Meanwhile, high UK bond yields improved the pound’s outlook, although it failed to break the 1.2600 ceiling of the 1.2410-1.2600 range.

During the day, the UK economic docket presented the April manufacturing PMI, which was revised higher and outperformed the March reading. The Bank of England (BoE) would meet on Thursday to decide its monetary policy. Money market futures expect a 25bp interest rate hike, but some BoE members recently expressed “some” concerns regarding a slower pace of the UK economy, which has consumers suffering amid of the worst contraction in the cost of living in decades.

Regarding the US, the economic docket featured US factory orders for March, which grew 2.2% m/m, above estimates of 1.1%. At the same time, March US JOLT job openings reached 11.549 million, beating expectations of 11 million, demonstrating the tightness of the US labor market.

Despite the mixed economic data out of the US, the Fed is expected to raise rates by 50 bps on Wednesday and could start cutting its balance sheet by $95bn. Additionally, money market futures have priced in additional 50bp increases at the June, July and September meetings, meaning the fed funds rate would be in the 2.25-2.50% range at that time.

GBP/USD Price Forecast: Technical Outlook

GBP/USD remains on the defensive, although price action over the last four trading sessions has consolidated in the 1.2410-1.2600 area. The MACD indicator shows that the downward pressure appears to be diminishing as the histogram approaches zero. However, as long as the distance between the MACD line and its signal line continues to point lower, some selling pressure will remain, thus the GBP/USD pair will be biased lower.

The first GBP/USD support would be 1.2500. A break of the latter would expose the April 29 daily low at 1.2445, followed by the yearly low at 1.2411.

Technical levels

Source: Fx Street

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