As the GBP/USD Finds Support above 1.2700, Attention Turns to the Fed and BoE Rate Decisions
Near 1.2710, the GBP/USD pair trades in positive territory for the second day in a row. It is anticipated that the US Federal Reserve will hold its essential interest rates steady at its fourth consecutive meeting. Widely expected, the BoE will maintain interest rates unchanged in light of indications that inflation is abating. This week will be dominated by the Federal Open Market Committee (FOMC) and the Bank of England (BoE) meetings.

On Tuesday morning, the GBP/USD pair maintained strong support above the 1.2700 level throughout the early Asian session. Ahead of the pivotal two events on Wednesday and Thursday, respectively, from the Federal Open Market Committee (FOMC) and the Bank of England (BoE), the markets adopt a cautious disposition. GBP/USD is trading at approximately 1.2710, remaining unchanged for the day.
The United States continues to experience unexpectedly high inflation. The preferred gauge of the Federal Reserve, the US Core Personal Consumption Expenditures Price Index (Core PCE), fell to 2.9% in December, marking the first time since early 2021 that it fell below 3%. Preparation has been made for the Federal Reserve to initiate interest rate reductions in the future months. Following an extensive endeavor to contain escalating inflation, the FOMC will maintain benchmark interest rates at a 23-year high of 5.25–5.5% at its January meeting.
Regarding the British Pound, it is generally expected that the BoE will maintain current interest rates. Traders will closely observe the interest rate guidance and communication regarding the potential for further reductions. Governor of the Bank of England Andrew Bailey stated that a rate cut is imprudent. Nonetheless, indications that the inflation crisis is abating could potentially persuade the central bank to reduce interest rates.
Market participants will now be monitoring the US JOLTS Job Openings and the Conference Board's Consumer Confidence gauge, both of which are scheduled for release on Tuesday. The FOMC meeting on Wednesday and the BoE interest rate decision on Thursday will be the focal points of this week. These events have the potential to incite market volatility and provide the GBP/USD pair with a distinct trajectory.
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