GBP/USD holds steady as BoE rate call looms

• GBP/USD hits new 30-month high after Fed rate cut.
• The BoE rate call is in the barrel for Thursday, but no move is expected.
• UK retail sales are due to end the week on Friday.

GBP/USD hit a new 30-month high on Wednesday, pushed to within inches of 1.3300 after the US Federal Reserve (Fed) cut interest rates by a jumbo 50 bps and recorded its first rate cut of the US central bank in over four years. . Britain’s Bank of England (BoE) is scheduled to hold its own September interest rate call early Thursday, but no move is expected from the BoE after it already cut benchmark rates earlier this summer.

Forex Today: Investors’ attention now turns to the health of the US economy

The BoE is expected to keep interest rates steady at 5.0% in a seven-to-two vote. The BoE’s Monetary Policy Committee (MPC) previously voted five to four to cut interest rates by 25 bps from 5.25%, and markets expect the BoE to hold steady for this meeting.

The Fed’s dot chart of the Federal Open Market Committee’s (FOMC) Summary of Economic Projections was also revised downward from the central bank’s previous rate outlook. Average Fed policy expectations now see the Fed Funds rate at 4.4% by the end of 2024 and 3.4% by the end of 2025, down from 5.1% and 4.1%, respectively.

Going deeper into the Fed notes, Fed policymakers now see US Gross Domestic Product (GDP) growing at a flat 2.0% through 2024, down from the previous print of 2.1% in June. Fed officials also expected the U.S. unemployment rate to settle around 4.4 percent by the end of 2024.

Fed Chairman Jerome Powell did his best to calm markets during the press conference that followed the Fed’s mild 50 bps rate cut, stressing that the Fed would resume its wait-and-see approach to economic data in the coming weeks , before making a further decision. tariff reductions. The Fed chief’s measured approach to explaining the Fed’s policy adjustment has helped keep market flows in balance, and rate markets are pricing in a 65% chance of no action at the next FOMC rate request on November 7.

GBP/USD price

Despite rebounding to a fresh 30-month high near 1.3300 on Wednesday, markets quickly pared the day’s volatility to keep Cable pegged close to familiar levels around 1.3200. A firm bullish trend is still contained in daily candlesticks, with the pair climbing above the 50-day exponential moving average (EMA) near 1.3000.

GBP/USD Daily Chart