FOMC meeting yesterday and the post-meeting press conference of the Fed chair Powell turned out to be hawkish. This 'hawkishness' resulted from failing to meet dovish expectations set by the market. While reference to 'additional policy firming' was removed from the statement, it was noted that FOMC members seek greater confidence of inflation moving down to 2% target sustainably before rates are reduced. Moreover, Fed Chair Powell strongly hinted at a post-meeting press conference that rate cut in March is not the base case scenario.
Traders will hear from Bank of England today as it is scheduled to announce a monetary policy decision at 12:00 pm GMT. No change to the level of rates is expected, with the main rate expected to stay at 5.25%. Economists expect that 8 out of 9 MPC members will vote for keeping rates unchanged, while 1 member will vote for a hike. This would be a shift from the previous meeting, at which 6 MPC members voted for a hold and 3 voted for a hike, and another sign that rates in the United Kingdom has likely peaked already. Bank's narrative may provide more hints on the timing of the first cut as money markets now see an almost equal chance of the first cut being delivered at May or June meeting.
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Open real account TRY DEMO Download mobile app Download mobile appTaking a look at GBPUSD chart at H4 interval, we can see that the pair has been trading sideways recently. Pair climbed above the 1.2715 resistance zone yesterday in the early afternoon but has given back all the gains later on as USD strengthened in the aftermath of the FOMC meeting. The 1.2650 support zone was tested this morning but bears did not manage to break below. Should the BoE meeting today provide some hints that May meeting is more likely as a timing for the first rate cut in the United Kingdom, the pair may find itself under pressure and break below the 1.2650 zone. In such a scenario, the next support to watch can be found in the 1.2600 area.
Source: xStation5
