GBP/USD Price Forecast: Near-term bias remains bearish ahead of Fed-BoE policy

• GBP/USD edges up to near 1.3300 as the US Dollar trades subduedly ahead of the Fed’s policy.
• Both the Fed and the ECB are expected to leave interest rates unchanged.
• The Cable will likely face a knee-jerk reaction in the near-term as momentum oscillators lean downwards.

The British Pound (GBP) is marginally higher at around 1.3300 against the US Dollar (USD) during the European trading session on Wednesday. The GBP/USD pair edges up as the US Dollar ticks lower ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT.

In the European session, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally lower to near 101.30.

Investors will pay close attention to the Fed’s interest rate decision as traders are not aggressively confident that the central bank will leave interest rates unchanged again. The CME FedWatch tool shows that the odds of the Fed leaving interest rates unchanged in the range of 3.50%-3.75% are 69.5%. In the last four policy meetings, the Fed didn’t execute any monetary policy adjustment and left policy rates steady.

Financial markets will also focus on the monetary policy statement and Fed Chair Kevin Warsh’s press conference to get fresh cues regarding inflation and the economic outlook in the wake of ongoing military aggression in the Middle East.

On Thursday, investors will focus on the Bank of England’s (BoE) monetary policy announcement. The BoE is expected to keep interest rates steady at 3.75%, with a 7-2 majority.

Analysts at Rabobank also said in a note that, “for now, the market is expecting steady policy from the MPC,” even as “hawkish dissenters will keep the market debating the risk of policy tightening from the BoE.” They argue that this debate is unlikely to translate into action in the near term, given “the backdrop of soft activity indicators and uncertainty about the autumn budget,” and conclude that RaboResearch “expects steady policy through to the end of the year.”

GBP/USD technical analysis

GBP/USD trades marginally higher at around 1.3300, but is retaining a near-term bearish bias as it holds beneath the 20-day exponential moving average (EMA) at 1.3353 and below the broken downward resistance trend line that now caps the market around 1.3489.

The Relative Strength Index (14) hovers near 44, hinting at subdued upside momentum and suggesting that recent rebounds remain corrective while the pair trades under these overhead technical barriers.

Strategists at Scotiabank have also described the short-term technical backdrop for GBP/USD as "bearish," noting that the "RSI is drifting further into bearish territory and threatening a push below 40." They highlight that the "local range is bound between the late June low in the mid-1.31s and the mid-July high in the mid-1.35s," with "near-term support at 1.3250" and "near-term resistance at 1.3350." This configuration, they suggest, underscores a market that remains vulnerable within a defined range as momentum indicators continue to deteriorate.

(The technical analysis of this story was written with the help of an AI tool. Know more.)