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GBP/USD Exchange Rate to Experience Volatility Following Fed Rate Decision?

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GBP/USD Exchange Rate Slips amid Fading Fed Cut Bets

The Pound US Dollar (GBP/USD) exchange rate is on the back foot this morning as USD sentiment is bolstered by fading Federal Reserve interest rate cut bets.

At the time of writing the GBP/USD exchange rate is trading at around $1.2692, down roughly 0.3% from this morning’s opening rate.

US Dollar (USD) to Soar following Fed Decision?

The US Dollar (USD) is surging against the majority of its peers this morning as fading Federal Reserve interest rate cut bets have served to lift the US currency.

However, these gains remain limited in advance of the Fed’s rate decision tomorrow.

No policy changes are expected this week, leaving markets to focus on the bank’s accompanying forward guidance.

Better-than-expected economic growth levels coupled with persisting inflation this year has led markets to push back on expectations that the central bank will begin loosening its monetary policy in May, to June, and has reduced bets on how many cuts are likely this year.

Should central bank policymakers suggest that interest rates are likely to stay higher for longer than previously expected, the US Dollar is likely to surge against its peers in mid-week trade.

Pound (GBP) to Stumble after BoE Interest Rate Decision?

The Pound (GBP) is trading in a wide range against the majority if its peers today as markets await the Bank of England’s (BoE) own interest rate decision, on Thursday.

With the central bank expected to keep interest rates on hold at a 16-year high of 5.25%, in March, GBP investors will also be primarily focused on the bank’s forward guidance.

With confusion circulating surrounding the timing of the central bank’s first rate cut, should the BoE successfully push back against speculation that it could begin loosening its monetary policy in June, Sterling could strengthen.

However, ahead of Thursday’s decision, Wednesday will see the release of UK’s latest consumer price index.

Tomorrow’s data is forecast to show inflation fell to a two-and-a-half-year low in February, and could undermine bets for an August rate cut just a day before the all-important interest rate decision.

At the end of the week, UK retail sales are forecast to have slumped, from January’s 3.4% expansion down to a 0.3% contraction for February’s reading.

Should the data confirm a slowdown in the UK retail sector, the Pound could end the week on the back foot.

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