Important events today:

14:00 UTC: USD – ISM Manufacturing Index.

18:00 UTC: USD – FOMC decision on the main interest rate.

The GBPUSD pair holds below the 1.2490 mark during the early Asian session on Wednesday. The decline in the main pair is supported by a strengthening US dollar (USD) amid cautious sentiment ahead of the Federal Reserve’s (Fed) interest rate decision later on Wednesday.

On Tuesday, the US Conference Board (CB) Consumer Confidence Index fell to 97.0 in April from 103.1 in the previous reading, marking the lowest level since July 2022. Meanwhile, the Chicago Purchasing Managers’ Index fell to 37.9 in April from 41.4 in March, below the market consensus forecast of 44.9, recording the lowest level since November 2022. Finally, the US Employment Cost Index (ECI) rose 1.2% quarter-over-quarter in the first quarter of 2024 compared to a 0.9% increase in the fourth quarter of 2023, exceeding the estimate of 1%.

The Fed is expected to hold its sixth consecutive meeting on Wednesday and leave rates unchanged. JPMorgan and Goldman Sachs expect the first rate cut in July, while Wells Fargo expects it no earlier than September. Investors are now assessing the likelihood that the Fed will cut rates in September at nearly 44%, compared to 60% at the beginning of the week, according to CME FedWatch Tool data. Market participants will focus more on the press conference by Fed Chairman Jerome Powell. A hawkish tone from the Fed could raise the dollar rate and put pressure on the GBP/USD pair.

On the other hand, the dovish stance of the Bank of England (BoE) is putting pressure on the British pound (GBP). BoE Governor Andrew Bailey is confident in the reduction of inflation in the UK and expects two or three rate cuts this year. Financial markets have priced the first rate cut by the Bank of England in August, expecting 50 basis points (bps).

Recommendations: Trade predominantly with buy orders at the price level of 1.2500. Consider sell orders at the price level of 1.2460.