GBPUSD pair is settling in a range that is slightly above the multi-day low.
GBPUSD pair struggles to make any significant progress throughout Wednesday’s Asian session and stalls out close to a multi-day low reached the day before.
In advance of the important central bank meetings, traders are hesitant to put new wagers.
The downside is still cushioned since traders prefer to stay out of the market before this week’s major central bank event risks. Which begin with the FOMC decision later today. In light of indicators of reducing inflationary pressures, the US central bank is generally anticipated to increase interest rates by 25 basis points. The wagers were solidified by Tuesday’s release of US wage growth statistics, which revealed that labor expenses climbed less than anticipated in the fourth quarter.
In fact, the Employment Cost Index increased 1.0%, according to the Labor Department, which is the smallest increase since the fourth quarter of 2021.
However, the cost of labor rose by 5.1% over the reporting period and is still much higher than the 3.5% that Fed policymakers consider to be compatible with moderate inflation.
Bets on lower Fed rate strengthen the USD and weaken the GBPUSD.
Additionally, policymakers have emphasized the necessity of maintaining higher rates for a longer period of time in order to reduce inflation. This means that the Fed will continue to sound pessimistic, which supports the US Dollar somewhat and works as a headwind for the GBPUSD pair. Investors will thus be looking for hints about the direction of future rate hikes in the accompanying monetary policy statement and in the comments made by Fed Chair Jerome Powell at the post-meeting news conference.
This will have a significant impact on the USD price dynamics and give the GBPUSD pair some significant momentum. Following that, attention will turn to the Bank of England (BoE) meeting on Thursday amid speculation that high consumer inflation may compel the central bank to keep raising interest rates. However, the choice should also help to decide which leg of a route the duo will take next.
