GBP/USD exchange rate is flat after the Federal Reserve kept interest rates unchanged after the first rate hike of the year. On Thursday morning, GBP/USD exchange rate was at 1.2440 ahead of the upcoming US GDP data.
GBP/USD exchange rate fluctuated after the Federal Reserve's first rate hike of the year. The Federal Open Market Committee (FOMC) decided to keep interest rates unchanged at 4.50%.
The committee amended its statement to remove any reference to inflation progress. This may be a reaction to a recent report showing that the headline consumer price index (CPI) rose to 2.9% in December from 2.7%.
The Fed expects that it will take longer for headline inflation to return to its 2.0% target. The biggest inflation risk is the recent wildfires in Los Angeles, which have made most things, including housing and insurance, more expensive. There are also concerns that some of Donald Trump's policies, such as mass deportations, tariffs, and tax cuts, will lead to high inflation.
The Fed maintains that the economy is solid and the labor market is making progress. As a result, most analysts expect the Fed to keep interest rates steady and then cut rates in July.
The next important GBP/USD news will be the upcoming US GDP data, which will provide more clues on the state of the economy. Economists expect the data to show that the US economy grew by 2.7% in the fourth quarter, a good end to the year.
The GBP/USD pair is likely to remain under pressure as analysts expect the Bank of England to cut interest rates more aggressively this year as the economy is slowing.
The daily chart shows that the GBP/USD pair peaked at 1.3435 in September and has now fallen to 1.2450. Its recent rebound has encountered a substantial resistance point at the 50-day exponential moving average (EMA).
The pair has slightly broken out of the upper side of the descending channel pattern. It has also fallen below the Ichimoku Cloud indicator. The RSI and MACD indicators have pointed upwards.
Therefore, the pair is likely to resume its downtrend and could retest the critical support level of 1.2350. A break above the 50-day EMA would point to more gains and invalidate the bearish view.