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How Will the Fed’s Rate Decision Impact the GBP/USD Exchange rate?

US Dollar Currency Forecast

GBP/USD Exchange Rate Steady as Markets Brace for Fed Policy Decision

The Pound US Dollar (GBP/USD) exchange rate is currently rangebound this morning ahead of a highly anticipated rate decision by the Federal Reserve.

At the time of writing the GBP/USD exchange rate is virtually unchanged this morning at $1.2157, leaving the pairing trading just shy of the 28-month low struck earlier in the week.

US Dollar (USD) to Rise on a ‘One and Done’ Rate Cut?

The US Dollar is centre stage in currency markets today as all eyes are on the Federal Reserve ahead of what is expected to the US central bank’s first rate cut in over a decade.

After weeks of speculation, the Fed is widely expected to deliver a rate cut of 0.25% when it concludes it July policy meeting later this evening.

However with the move already priced in by markets the cut itself is unlikely to elicit much of a response in the US Dollar.

Instead the focus will be on the Fed’s forward guidance, with the ‘Greenback’ expected to accelerate if the bank signals the cut will be a single event and not the start of a new easing cycle.

With recent economic data indicating that the US economy remains remarkably resilient it seems fair to assume the Fed will strike a fairly hawkish tone today.

However there remains the outside chance that the Fed could signal plans for another cut in the coming months, an outcome which would likely prove USD negative.

GBP/USD Exchange Rate Forecast: Dovish BoE to Drive the Pound Lower?

Looking past the Fed’s rate decision to the second half of the week, the Pound US Dollar (GBP/USD) exchange rate looks poised to extend its recent losses as the Bank of England (BoE) concludes its own policy meeting on Thursday.

Whilst no policy changes are expected from the BoE in August, policymakers are widely expected to respond to the recent run of weak UK economic data and a government more amenable to a no-deal Brexit by striking a more dovish tone in its forward guidance.

Potentially, placing further pressure on Sterling will also be the UK’s manufacturing PMI, which is forecast to show that the contraction in the UK’s factory sector was extended in July.

Meanwhile the focus for USD investors will likely turn to the latest US payrolls report, with slowing employment growth likely to dent the appeal of the US Dollar at the very tail end of the week.