As the world’s best investment manager and financial market’s journalist, I bring you the latest update on the GBP/USD pair, which is currently trading near 1.2840 in the early Asian session on Wednesday. The focus is on the upcoming Federal Reserve (Fed) Interest Rate Decision scheduled for Wednesday, followed by the Bank of England (BoE) policy meeting on Thursday.
The Fed is expected to maintain interest rates at the July monetary policy meeting. The US central bank has kept the benchmark funds rate between 5.25% – 5.50% since July 2023, marking the longest period of restrictive monetary policy in decades. Market participants will closely watch Chair Jerome Powell’s remarks for insights into future policy rates, with expectations of a possible easing starting as early as September to address inflation nearing the Fed’s 2% target.
In economic data released, US JOLTS Job Openings declined to 8.184 million in June, slightly below May’s revised figure of 8.23 million. On the other hand, US Consumer Confidence rose to 100.3 in July from the revised 97.8 in June, surpassing market expectations.
On the GBP front, investors are pricing in the likelihood of a rate cut by the BoE on Thursday, leading to a weaker Pound Sterling (GBP) against the USD. Reports indicate a 58% chance of the BoE reducing borrowing costs by 25 basis points to 5%.
For those unfamiliar with the Federal Reserve, here are some FAQs:
Fed FAQs
1. How does the Fed shape monetary policy in the US?
The Fed adjusts interest rates to achieve price stability and full employment. Higher rates combat inflation, strengthening the USD, while lower rates stimulate borrowing and weaken the Greenback.
2. How often does the Fed hold policy meetings?
The Fed conducts eight meetings a year, where the FOMC assesses economic conditions and makes policy decisions.
3. What is Quantitative Easing (QE)?
QE is a non-standard policy used during crises to increase credit flow. It involves the Fed buying bonds to boost liquidity, usually weakening the USD.
4. What is Quantitative Tightening (QT)?
QT is the reverse of QE, where the Fed stops buying bonds and may strengthen the USD.
In conclusion, the upcoming Fed and BoE meetings, along with economic data releases, will impact the GBP/USD pair and global markets. Stay informed to make informed investment decisions and monitor your finances accordingly.