01 May 2024, GBP/USD
Events to watch out for today:
17:00 GMT+3. USD - ISM manufacturing index
21:00 GMT+3. USD - FOMC decision on the key interest rate
GBPUSD:
GBPUSD is holding below 1.2490 during the early Asian session on Wednesday. The major pair's decline is supported by a strengthening US Dollar (USD) amid cautious sentiment ahead of the US Federal Reserve's (Fed) interest rate decision later on Wednesday.
On Tuesday, the Conference Board (CB) US consumer confidence index fell to 97.0 in April from 103.1 in the previous reading, the lowest level since July 2022. Meanwhile, the Chicago Purchasing Managers' Index fell to 37.9 in April from 41.4 in March, below the market consensus forecast of 44.9. This reading recorded the lowest level since November 2022. Finally, the U.S. Employment Cost Index (ECI) rose 1.2% QoQ in Q1 2024, compared to a 0.9% increase in Q4 2023, beating the estimate of 1%.
The US Federal Reserve is expected to hold its sixth consecutive meeting on Wednesday and leave rates unchanged. JPMorgan and Goldman Sachs expect the first rate cut in July, while Wells Fargo does not expect a rate cut until September at the earliest. Investors now rate the probability that the Fed will cut rates in September at nearly 44%, up from 60% earlier in the week, according to CME FedWatch Tool data. Market participants will be more focused on Fed Chairman Jerome Powell's press conference. The Fed's hawkish tone could boost the dollar and put pressure on the GBP/USD pair.
On the other hand, the dovish stance of the Bank of England (BoE) is putting pressure on the Pound Sterling (GBP). Bank of England Governor Andrew Bailey is confident that UK inflation is falling and expects two or three rate cuts this year. Financial markets priced in the Bank of England's first rate cut in August, expecting 50 basis points (bps).
Trading recommendation: Trade mainly with buy orders at the price level of 1.2500. We consider sell orders at the price level of 1.2460.
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