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GBP/USD exchange rate to be rocked by Fed rate decision?

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GBP/USD exchange rate muted ahead of Fed rate decision

The pound US dollar (GBP/USD) exchange rate is trading in a narrow range this morning ahead of the Federal Reserve’s interest rate decision later this evening.

At the time of writing the GBP/USD exchange rate is trading at around $1.2478, virtually unchanged from this morning’s opening rate.

Fed interest rate decision to infuse volatility in the US dollar (USD)?

The US dollar (USD) is trading sideways as markets brace for the Federal Reserve’s interest rate decision later this evening.

As the Fed are widely expected to keep interest rates on hold at 5.5% today, investor attention will likely shift to the accompanying press conference for any clues surrounding the future of monetary policy.

As the FedWatch Tool is currently pricing in an almost 50/50 chance that the next Fed rate cut will be delivered in September, any dovish commentary from the central bank’s officials this evening could see rate cut bets for September rise, and could in turn see the US dollar tumble against its peers.

However, should policymakers adopt a more hawkish tone in response to  recent stronger-than-expected US employment and inflation figures the ‘Greenback’ could strengthen against its peers..

In the meantime, we could see some other high-impact US economic releases influence USD exchange rates.

The latest ISM manufacturing PMI and American JOLTs job openings are forecast to report slightly disappointing figures, which could limit the US dollar’s upside potential today. 

Pound (GBP) listless amid minimal UK data?

The pound (GBP) is trading mostly flat this morning following the release of the UK’s manufacturing PMI.

April’s finalised index slipped to 49.1 from 50.3 in the previous month, but above preliminary expectations it would print at48.7. Confirmation that the sector sunk back into contraction territory undermined GBP exchange rates this morning.

Looking ahead, the only other data release of note this week will come in the form of the UK’s finalised services PMI for April, scheduled foe release on Friday.

The latest preliminary figures showed that growth in the UK’s vital services sector jumped to an 11-month high in August. If this is reflected in the final figures it could allow the pound to end the week on the front foot.

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