Market Analysis

During the early Asian session on Monday, the GBP/USD pair maintains a positive stance near 1.2520, with support stemming from a weaker US Dollar below the 106.00 psychological mark. Attention is directed towards the upcoming Federal Open Market Committee (FOMC) interest rate decision and Press Conference scheduled for Wednesday.

It is widely anticipated that the US Federal Reserve (Fed) will maintain its current interest rate range of 5.25%–5.5% on Wednesday, reflecting confidence in the robustness of the US economy despite recent signs of increasing inflation. The Core Personal Consumption Expenditures (PCE) Price Index, released by the US Bureau of Economic Analysis, revealed a 2.8% year-on-year increase in March, fueling speculation that any rate cuts might be deferred until September.

Fed policymakers have emphasized that any rate cuts in the near future are unlikely, citing inflation levels above the 2% target and a perceived stickiness in price growth. This "higher-for-longer" stance may provide some support for the US Dollar, potentially limiting downward pressure on the GBP/USD pair.

Conversely, market sentiment suggests growing expectations that the Bank of England (BoE) will begin to ease monetary policy during its June meeting. BoE Governor Andrew Bailey hinted at the possibility of two or three rate cuts this year during the press conference following the last monetary policy meeting. Should the BoE adopt a more dovish tone in its communications, it could weigh on the Pound Sterling (GBP) and pose challenges for the GBP/USD pair.

Paraphrasing text from "FX Street" all rights reserved by the original author.