Pound Sterling falls to around 1.2825 against the US Dollar ahead of the Fed and BoE policy meetings.

The Pound Sterling (GBP) fell in Wednesday’s London session as investors remained cautious ahead of the Bank of England’s (BoE) interest rate decision on Thursday. The British pound falls versus its major counterparts. With the exception of the Australian dollar (AUD), as investors expect the Bank of England to cut interest rates for the first time since March 2020 at its August meeting.

Firm anticipation of BoE rate changes on Wednesday has weighed significantly on the Pound Sterling.

The Bank of England has maintained a Since December 2021. The government has maintained a restrictive monetary policy posture in an effort to reduce inflation. Which has been fueled by pandemic-related stimulus.

Market analysts believe that decreasing interest rates by 25 basis points (bps) will be a difficult decision. As authorities have been hesitant to support rate reduction due to strong inflation in the services sector. The annual service inflation rate in the United Kingdom (UK) rose gradually by 5.7% in June. Above the bank’s prediction of 5.1% and practically doubling the level required to boost confidence in rate decreases.

While expectations for BoE rate decreases have risen significantly. The central bank is less likely to commit to a precise policy expansion route given the strong wage growth momentum.

Daily Market movers: Pound Sterling falls on strong BoE rate-cut bets.

The Pound Sterling In Wednesday’s European session. The euro edged lower to around 1.2825 against the US dollar. The GBPUSD declines despite the US dollar’s downturn, indicating. That the British currency is under heavy selling pressure. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, fell 0.2% to 104.20 on the day. With investors looking ahead to the Federal Reserve’s (Fed) monetary policy announcement on Wednesday at 18:00 GMT.
The Fed is widely expected to keep interest rates unchanged in the 5.25%-5.50% range. This would be the ninth consecutive decision to hold key borrowing rates at current levels since July 2023. Despite predictions of a stable interest rate decision. Investors will stay on their toes The Fed is expected to send a clear signal that rate decreases are imminent.
According to the CME FedWatch Tool, 30-day Federal Fund Futures pricing data suggests. That the central bank’s reduction of interest rates by 25 basis points (bps) at the September meeting is already priced in.

Fed will begin lowering interest rates have been fueled by increased confidence that inflation will return to the bank’s target of 2%.

Expectations that the Fed will begin lowering interest rates have been fueled by increased confidence that inflation will return to the bank’s target of 2%. Lower-than-expected readings in the US Consumer Price Index (CPI) statistics for May and June, as well as a strong drop in the Q2 GDP Price Index, boosted confidence. Furthermore, weakening labor market indicators have fueled anticipation about rate decreases in September.
In the Wednesday session, investors will also focus on the ADP Employment Change data for July. Which will be released at 12:15 GMT. The report is expected to reveal that labor demand in the private sector remained stable. With new payrolls totaling 150K, in line with the June estimate.