GBP/USD steadies ahead of back-to-back Fed and BoE decisions
The Pound Sterling edged higher for a second session as traders brace for Wednesday's Fed hold and Thursday's BoE rate decision.
The Fed is expected to hold rates at 3.50% to 3.75% on Wednesday as the Iran conflict clouds the rate outlook.
The BoE is widely expected to hold at 3.75% on Thursday in a 7-2 vote after the Iran-driven energy shock slashed March rate cut odds.
GBP/USD rose about 0.3% on Tuesday, gaining ground for a second consecutive session and trading around 1.3360. The pair has found a floor between 1.3250 and 1.3300 after sliding to a three-month low close to 1.3220 late last week, though it remains below both its key daily moving averages. The two-day bounce has produced a pair of modestly bullish candles, but price is still well within the broader sell-off from the late-January high near 1.3870.
Wednesday brings the Federal Reserve's (Fed) March decision, where the central bank is all but certain to keep interest rates on hold. The focus falls squarely on the updated Summary of Economic Projections (SEP) and dot plot, with the Iran conflict and surging energy prices complicating the current path toward further rate cuts. Futures pricing has shifted sharply since the war began, with traders now expecting only one cut this year, likely in December, compared with two or three before the conflict escalated. Chair Jerome Powell's press conference, one of his last before stepping down in May, will be watched for any signal on how the Federal Open Market Committee (FOMC) is weighing the oil shock against a softening labour market.
Thursday is equally consequential for the Pound. UK employment data lands first, with the ILO unemployment rate forecast to tick higher to 5.3% from 5.2% and average earnings expected to cool to 3.9% from 4.2%. The Bank of England (BoE) rate decision follows at noon, where the Monetary Policy Committee (MPC) is expected to hold at 3.75% in a 7-2 vote. Just weeks ago, markets priced an 80% chance of a March cut; the Iran-driven energy shock has reversed that entirely. The vote split will be closely watched, with a 6-3 outcome signalling more dovish pressure than the consensus 7-2.
GBP/USD daily chart
Technical Analysis
In the daily chart, GBP/USD trades at 1.3361. The pair holds just above the 200-day exponential moving average near 1.3375, while price remains capped well below the 50-day EMA around 1.3460, keeping the near-term tone mildly bearish within a broader range. The recent sequence of lower closes from the mid-1.36s toward the low 1.33s confirms selling pressure, though the Stochastic oscillator stabilising in the high-20s suggests downside momentum is losing force rather than accelerating.
Immediate resistance emerges at the 1.3400/1.3420 area, with a break above exposing the 1.3460 region around the 50-day EMA. A daily close above that latter barrier would be needed to ease the downside bias and open the way toward 1.3550. On the downside, initial support stands at the recent 1.3220 low, followed by the 1.3150 area if sellers regain control. A sustained move below 1.3220 would confirm a continuation of the bearish phase toward progressively lower levels.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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