GBP/USD finds support again near 1.2465 ahead of Fed’s decision

• US dollar weakens ahead of the FOMC statement.
• Market participants ignore US economic data
• GBP/USD fails to benefit from the relatively weaker dollar.

The GBP/USD is falling modestly on Wednesday before the release of the FOMC statement. After reaching a daily high at 1.2537, it turned to the downside, falling to test the 1.2465/70 support area, where the lows of the last three days are located. The pound remained above and rebounded to 1.2500.

Market participants await the outcome of the FOMC meeting. The DXY is falling on Wednesday, trading at 103.25, down 0.20%. While US yields pulled back, to neutral territory for the day.

Data ignored, markets point to the Fed

Economic data from the US came in weaker than expected but had no impact on the greenback. The ADP Employment report showed an increase in jobs in the private sector of 247K below the 395K expected. The ISM Service PMI in April dropped unexpectedly from 658.3 to 57.1. The S&P Global Servicer MIS was revised from 54.7 to 55.6.

The numbers were mostly ignored ahead of the Fed’s event. The US central bank is expected to announce a rate hike by 50bps amid higher inflation. There won’t be updated projections. Chair Powell's press conference will be watched closely and will likely keep volatility high.

On Thursday the Bank of England will announce its decisions on monetary policy and a 25bps to1.00% is expected.

“GBP/USD broke below 1.2500 for the third time in three sessions this morning. Similar moves on Monday and Tuesday were, however, quickly reverted. Still, it looks like a matter of time now for the pair to make a decisive break lower: if not triggered by the FOMC announcement today, it could come as a consequence of tomorrow’s Bank of England policy meeting, which we expect to defy hawkish expectations and add some pressure to the pound”, mentioned analysts at ING.

Technical levels