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Pound Sterling US Dollar (GBP/USD) Exchange Rate Flat Ahead of Federal Reserve Rate Statement

Pound US Dollar (GBP/USD) Exchange Rate Muted Ahead of Fed Interest Rate Decision

The Pound Sterling US Dollar (GBP/USD) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of $1.2571.

This afternoon, the US Federal Reserve are scheduled to conclude its two-day policy meeting which has likely put pressure on the Dollar.

It is expected that the bank will leave interest rates unchanged.

However, markets will look to whether the Fed signals plans to cut interest rates later in the year as expected and called for by US President Donald Trump.

Commenting on this, CEO of Adams Funds, Mark Stoeckle said:

‘If they don’t [reduce the interest rate] in June, the words he uses are going to have to be pretty careful that they are open to July.

‘[policymakers] don’t want to make it sound like [they] are beholden to the market or to the president, [but even a single rate cut in July] buys you some time to get more data. It saves face for everybody.’

Sterling (GBP) Flat as UK Inflation Cools

Meanwhile, data released on Wednesday morning revealed that the UK inflation rate cooled in May and hit the Bank of England’s (BoE) inflation target.

The annual Consumer Price Index (CPI) rose by 2% in May following April’s increase of 2.1%.

In its bulletin, the Office for National Statistics (ONS) revealed:

‘Falling fares for transport services, particularly air fares influenced by the timing of Easter in April, and falling car prices produced the largest downward contributions to the change in the rate between April and May 2019.’

Data also revealed that UK wages are continuing to grow faster than inflation, as average earnings rose by 3.4% in May.

However, this means that there is very little chance the BoE will increase interest rates.

Commenting on this, Tom Stevenson, Investment Director for Personal Investing at Fidelity International stated:

‘The prospect of low rates for the foreseeable future, together with last week’s above-inflation increase in average earnings, means UK households should be feeling more relaxed about their financial prospects than for some time.’

US Dollar (USD) Muted as US-China Trade Talks to Resume

On Tuesday, US President Donald Trump announced that US-China trade talks were due to resume ahead of next week’s G20 summit.

According to Chinese state media, Xinhua, Chinese President Xi Jinping stated he was prepared to meet President Trump at the summit.

In a tweet, the US President wrote:

‘Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting.’

The continuation of trade discussions after talks came to a standstill last month and caused China to retaliate likely caused an upswing in risk-appetite.

Pound US Dollar Outlook: Will a Dovish BoE Weigh on GBP?

Looking ahead to this afternoon, it is likely the US Dollar (USD) could slide against the Pound (GBP) following the release of the Federal Reserve’s interest rate decision and monetary policy statement.

If it is revealed the Fed signal they are going to cut interest rates in the near-term, it could dampen sentiment in the ‘Greenback’.

Meanwhile, on Thursday Sterling could slump following the release of the Bank of England’s (BoE) interest rate decision and meeting minutes.

If the tone of Governor Mark Carney is overly dovish and the bank hints at an interest rate cut in the future, the Pound US Dollar (GBP/USD) exchange rate could slide.