GBP/USD Recovers to 1.3360 as Fed Pause Expected and Dollar Loses Steam

The GBP/USD pair nudges higher in early Wednesday trading, hovering near 1.3360 as traders brace for the US Federal Reserve’s policy decision later today. After slipping to a two-month low of 1.3307 on Tuesday, the British Pound found support as the US Dollar softened ahead of the anticipated Fed pause.

Key Drivers:

• 📉 Fed Expected to Hold Rates: Markets overwhelmingly expect the Fed to keep its benchmark rate steady at 4.25%–4.50% in July, with CME FedWatch pricing in a 97% probability of no change. Attention now turns to the FOMC press conference for any dovish cues pointing to possible rate cuts from September.
• 📊 Data-Heavy Week Ahead: Investors await Q2 PCE inflation data and July’s Nonfarm Payrolls to gauge the Fed’s next moves. Weaker-than-expected readings could pressure the USD further.
• 🇬🇧 Sterling Faces Headwinds: While GBP shows resilience today, it remains under pressure from a weakening UK labor market and persistent inflation. The Bank of England is now widely expected to cut rates by 25bps in August, with more easing possible by year-end.
• 🛍️ Mixed UK Fundamentals: A recent uptick in food sales offered brief support, but broader economic indicators like the PMIs continue to signal softness, reinforcing expectations of a BoE policy pivot toward growth support.

Technical Snapshot:
GBP/USD has bounced off 1.3300 support but faces short-term resistance near 1.3380. A sustained break above that level could pave the way for a move toward 1.3450. On the downside, a drop below 1.3300 may reopen the path toward 1.3250 support.

Stay tuned for post-Fed volatility — GBP/USD’s next major move may hinge on Powell’s tone and Friday’s NFP data.

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