- US dollar weakens ahead of FOMC policy decision.
- Market participants ignore US economic data.
- GBP/USD does not benefit from the relatively weaker dollar.
The GBP/USD is falling modestly on Wednesday ahead of the FOMC statement release. After reaching a daily high at 1.2537, it turned lower, falling to test the 1.2465/70 support area, where the lows of the last three days are located. The pound remained higher and bounced back towards 1.2500.
Market participants await the outcome of the FOMC meeting. DXY falls on Wednesday, trading at 103.25, down 0.20%. While US yields fell back to neutral territory during the day.
Data ignored, markets point to the Fed
US economic data was weaker than expected but had no impact on the dollar. The ADP employment report showed a private sector job gain of 247,000 below the 395,000 expected. The ISM Services PMI for April unexpectedly fell from 658.3 to 57.1. The S&P Global Servicer MIS was revised from 54.7 to 55.6.
The numbers were mostly ignored ahead of the Fed event. The US central bank is expected to announce a 50bp rate hike amid higher inflation. There will be no updated projections. Chairman Powell’s press conference will be closely watched and will likely keep volatility high.
On Thursday the Bank of England will announce its monetary policy decisions and a 25bp is expected at 1.00%.
“GBP/USD broke below 1.2500 for the third time in three sessions this morning. However, similar moves on Monday and Tuesday were quickly reversed. Still, it looks like it is now a matter of time before the pair breaks decisively lower: if not triggered by today’s FOMC announcement, it could be a fallout from tomorrow’s Bank of England policy meeting, which we expect will defy aggressive line expectations and add some pressure to the pound,” ING analysts said.
Technical levels
Source: Fx Street
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