GBP/USD off 2-week low ahead of FOMC decision, forecasts

The GBP/USD currency pair edged higher on Wednesday, while rebounding from a two-week low of 1.2688, ahead of the outcome of the Federal Reserve’s two-day policy meeting and the release of US CPI inflation figures for May.

The Fed is widely expected to leave its federal funds rate target range without change at a 23-year high of 5.25%-5.50% for the seventh straight policy meeting in June.

Therefore, the focus will likely be on the central bank’s updated economic projections along with Fed Chair Jerome Powell’s press conference for clues over the timing of potential rate cuts.

Markets are now pricing in about a 56% chance of a Fed rate cut occurring in September, compared with a 78% chance a week ago, according to the CME FedWatch tool.

A few hours before the Fed’s decision, market players will have the opportunity to look into the latest US CPI data.

Annual headline consumer inflation in the United States probably steadied at 3.4% in May, according to market consensus.

Annual core CPI inflation probably eased to 3.5% in May from 3.6% in April – a three-year low.

Meanwhile, in other macro data, the British economy registered zero growth in April from a month ago, following a 0.4% expansion in March. Declines in industrial production and construction activity offset an expansion in services.

Currency Pair Performance

As of 9:23 GMT on Wednesday the GBP/USD currency pair was edging up 0.12% to trade at 1.2755.