– Written by
David Woodsmith
STORY LINK Fed LIVE: Test for Pound Sterling Bulls, GBP/USD Dependent on Dip Buyers?
The Pound to Dollar (GBP/USD) exchange rate has found some support below 1.3300 and is trading around 1.3320 with a firm dollar limiting scope for any fresh advance.
The Federal Reserve policy decision is likely to be crucial for near-term direction with choppy trading and potential short-term dollar gains if the Fed is cautious over the scope for 2026 rate cuts.
Although noting the potential for dollar gains after the Fed decision, ING added; “but the release of what should be soft jobs data next week and seasonal December weakness suggest that today’s dollar rally might not last.
According to UoB; “today, there is scope for GBP to test 1.3265 before a recovery can be expected. Based on the current momentum, a clear break below this level is unlikely. On the upside, resistance levels are at 1.3330 and 1.3355.
IG Group commented; “The early September low at $1.33 is now being fought over, but a close above here helps to reinforce the bullish view.”
There are very strong expectations that the Fed will cut rates later on Wednesday by a further 25 basis points to 3.75% with the main focus on the policy outlook.
ING commented; “The big focus will be the Summary of Economic Projections (SEP), the number of dissenters against the 25bp cut, and then Chair Powell’s press conference.”
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BNY Americas macro strategist John Velis commented; “The post-meeting press conference could be – as always – a wild card.”
There is the risk of relatively hawkish comments from Chair Powell and some dissents against the December decision to cut rates.
MUFG commented; “Given the divisions over the outlook it will be difficult for Powell to send a strong message of pause but no doubt by reaching a consensus the message will certainly be that the Fed have been pro-active and can now assess incoming data.”
Some members will also be reluctant to forecast further significant cuts for next year.
BNY’s Velis added; During recent FOMC pressers, Chair Powell’s tone has often departed from the actual policy action taken or the statement accompanying that action. We could easily see a rate cut, a dovish set of dots, and a somewhat hawkish qualitative assessment at Wednesday’s press conference.”
ING commented; “While all the above sounds dollar positive, it is also widely expected. And perhaps it is still a surprise that the rates market still has so much easing priced in. Presumably, this is the Kevin Hassett effect, where his arrival at the Fed in February can throw a dovish cloak over the FOMC outlook.”
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TAGS: Pound Dollar Forecasts
