31 January 2024, GBP/USD
Event to watch out for today:
21:00 EET - Federal Reserve System (Fed) Interest Rate Decision
GBPUSD:
GBP/USD fell for the second consecutive session on Wednesday, dropping to 1.2680 during the Asian session. Risk aversion is driving investors towards the US dollar, which is weakening the GBP/USD pair. US President Joe Biden stated that the United States will respond to the recent drone attack on US troops near the Jordan-Syria border with a multi-layered approach.
Despite a decline in US Treasury yields, the US Dollar Index (DXY) rose to 103.60, breaking a three-day losing streak. Currently, the 2-year and 10-year US bond yields stand at 4.31% and 4.02%, respectively. Additionally, the Federal Open Market Committee (FOMC) is expected to keep the interest rate unchanged at 5.5 per cent during its meeting on Wednesday.
According to CME's FedWatch Tool, there is a 43% probability that the Fed will make its first rate cut in March. Furthermore, there is a 53% probability of a 25 basis point rate reduction in May. Investors are anticipated to closely monitor the US employment change data from ADP, which is scheduled for release on Wednesday. This data is frequently regarded as a precursor to the more comprehensive US non-farm payrolls report, which will be released later this week.
The Bank of England (BoE) is expected to maintain its current interest rates at its upcoming meeting on Thursday. In December, Bank of England Governor Andrew Bailey stated that it will take some time for inflation to reach the 2.0 per cent target, estimating that it will not happen until 2025.
Additionally, Bank of England members stressed the need for continued restrictive monetary policy to tackle inflation. This commitment may strengthen the Pound Sterling (GBP) and limit losses for the GBP/USD pair.
Trade recommendation: Trading Sell orders from the current price level
Monitor significant macroeconomic events using the Forex Economic Calendar.
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