- GBP/USD drifts lower to near 1.3525 in Tuesday’s early Asian session.
- Fed is widely expected to leave rates unchanged at 3.50%–3.75% at its April meeting on Wednesday.
- The BoE is likely to keep rates on hold on Thursday.
The GBP/USD pair trades in negative territory around 1.3525 during the early Asian session on Tuesday. The Pound Sterling (GBP) softens against the US Dollar (USD) as traders prefer to wait on the sidelines ahead of the Federal Reserve (Fed) and the Bank of England (BoE) later this week.
The Fed is likely to keep the federal funds rate between 3.50% and 3.75%, where it has sat since January. Deutsche Bank analysts noted a repricing of Fed policy toward a more hawkish stance, driven by persistent oil-related inflation.
Traders will closely watch Jerome Powell’s press conference after the meeting for fresh impetus. Any hawkish comments from Fed officials could provide some support to the Greenback and create a headwind for the major pair.
Markets expect the UK central bank to keep interest rates on hold on Thursday, and traders will be watching for any signs it is moving towards raising rates. Analysts see the UK economy as particularly vulnerable to the rise in energy prices caused by the war due to the country’s heavy use of natural gas.
“Our baseline forecast assumes Bank Rate will remain on hold for the rest of the year,” said Edward Allenby, senior UK economist at Oxford Economics. “The committee will have more information about how the energy shock is feeding through to the economy by the end-July meeting,” Allenby added.
