GBPUSD:
The Pound-Dollar pair holds positive momentum near 1.2520 on Monday in the early Asian session. The rise in the major pair is supported by the decline in the US Dollar (USD) below the psychological 106.00 mark. Investors will be closely watching the Federal Open Market Committee (FOMC) interest rate decision and press conference on Wednesday.
The U.S. Federal Reserve (Fed) is expected to leave the interest rate unchanged in the current range of 5.25%-5.5% on Wednesday. The U.S. economy remains strong and inflation has started to pick up. On Friday, the U.S. Bureau of Economic Analysis showed that the core personal consumption expenditures (PCE) price index rose 2.8% in March from a year earlier. The reports sparked speculation that the first rate cut may not come until September.
Fed policymakers have indicated that there will be no rate cut in the next few months as inflation has been stronger than expected and remains above the Fed’s 2% target. The US central bank’s stance that rates will rise for a long time may provide some support for the dollar and limit the GBP/USD pair’s decline.
On the other hand, investors are raising bets that the Bank of England (BoE) will start to reduce borrowing costs at its June meeting. Bank of England Governor Andrew Bailey told a press conference after the last monetary policy meeting that two or three rate cuts this year are not “unreasonable”. A softer statement from the Bank of England Governor could weaken the Pound Sterling (GBP) and create a headwind for the pair.
Trading recommendation: Trade predominantly with Buy orders from the current price level.
Origin: FreshForex
