FX.co ★ A12 | GBP/USD

The British Pound and the US Dollar had a period of consolidation during early Asian trading on Tuesday following a strong rally. The GBP/USD pair reached an important technical level, the 200-day moving average, and reached a three-week high at around 1.2560. This increase in value happened as the US Dollar Index dropped to 105.65. The primary factor influencing currency markets this week will be the interest rate decision by the Federal Open Market Committee on Wednesday. It is widely expected that the Federal Reserve will keep interest rates the same, as they are already at their highest level in over two decades. However, investors will closely monitor the tone of the meeting and the subsequent press conference by the Federal Reserve Chair, Jerome Powell, for any indications about future monetary policy. At the beginning of the year, there were expectations of the Fed raising rates by approximately 6.25%, but this has been revised down to just one anticipated rate cut for the rest of 2024. Across the Atlantic, the Bank of England is sending mixed messages from its policymakers regarding inflation.

The Pound was boosted. Since there won't be any significant economic data coming from the UK soon, the GBP/USD exchange rate will most likely be influenced by the movements of the US dollar. After its earlier surge, the GBP/USD pair did experience some retreat and tested the 20-period simple moving average on the 4-hour chart. Currently, the technical indicators show a bearish trend. The Relative Strength Index is still below the neutral level of 50, and the Moving Average Convergence Divergence has not yet confirmed a bearish crossover below its trigger line. Both indicators are in negative territory at the moment. On the downside, the 20-period SMA at 1.2605 is acting as a defense against selling pressure. If the price breaks through this level and falls below 1.2570, it could lead to further declines and potentially push the GBP/USD down to the 1.2520 support level, which was the lowest point reached on February 5th.