GBP/USD stays positive at around 1.2550s after Fed’s rate hike
- GBP/USD stays positive following the Federal Reserve’s “dovish” interest rate hike.
- Federal Reserve officials voted unanimously for a 25 bps rate hike.
- Policymakers dropped some hawkish language, perceived as a signal that the Fed could pause.
The GBP/USD rallied sharply to a fresh YTD high at 1.2589 on the back of a 25 bps interest rate increase by the Federal Reserve (Fed), which dropped “hawkish” language, adopting a more neutral stance. At the time of writing, the GBP/USD remains volatile, trading at around 1.2560-1.2590, with gains close to 0.80%.
Review of the Fed’s May meeting monetary policy statement
To highlight, Federal Reserve officials voted unanimously for a quarter of a percent increase to the Federal Funds Rate (FFR). They switched the language from “anticipating that some additional policy firm may be appropriate…” to “determining the extent to which additional policy firming may be appropriate,” policymakers would assess their decisions based on the economy, inflation, and the financial markets behavior.
Powell and Co. added that tightening credit conditions would help the Fed to achieve its goal. They emphasized the resilience and soundness of the banking system and added that inflation remains high and the labor market tight. Concerning the QT, the balance sheet reduction would continue as planned.
After the Federal Reserve’s decision, US rate futures show traders are pricing in rate cuts in September, according to Reuters.
GBP/USD’s pair reaction to the headline
The GBP/USD climbed sharply but has retraced some gains as the Federal Reserve Chai Jerome Powell’s press conference begins. The 1-hour chart portrays the GBP/USD as forming a gravestone doji, which could suggest further downside estimates. Nevertheless, GBP/USD traders better buckled up; as volatility increases, it could trigger some action.
GBP/USD key resistance levels lie at 1.2550, 1.2589, and 1.2600. On the flip side, the GBP/USD would find support at 1.2510, the 20-hour SMA, followed by the 1.25 figure, ahead of dropping towards the 50-hour SMA at 1.2492.
GBP/USD Technical Levels