GBP/USD stabilizes post Fed decision, traders eye Powell

• GBP/USD shows limited movement, trading between 1.2690 and 1.2730 after the Fed decided to hold interest rates.
• Federal Reserve's unanimous vote to keep rates steady focuses on inflation control and delays rate cuts.
• Investors now look to Fed Chair Jerome Powell's press conference for further direction, with US Treasury yields and Dollar Index reflecting the recent Fed stance.

The GBP/USD is virtually unchanged in the mid-North American session, as the Federal Reserve (Fed) decided to keep rates unchanged, while pouring cold water on rate cut speculations. At the time of writing, the major trades were volatile, around 1.2690 – 1.2730, ahead of the Chair Powell's press conference.

GBP/USD erased its gains following Fed’s decision

During their monetary policy meeting, Federal Reserve officials unanimously agreed to maintain interest rates as they currently are. They emphasized the need to wait for greater assurance that inflation is steadily moving towards the 2% target before considering any rate reductions. The Fed also noted that the prospects of meeting their dual mandate are improving and stressed their ongoing vigilance concerning inflation risks.

As for the balance sheet reduction, the plan will continue as previously outlined, coupled with stricter controls on Federal Open Market Committee (FOMC) confidential information for all Fed staff with access to it.

Following this announcement, rate cut expectations for the March meeting are at 50% odds vs. May. The US 10-year Treasury note yield briefly surged to 4% before settling back to around 3.97%. Concurrently, the US Dollar Index (DXY) initially moved towards 103.50 but then slightly retreated to 103.35.

GBP/USD Reaction to Fed’s Decision

The GBP/USD spiked towards 1.2730 before aiming lower as US Treasury bond yields advanced, followed by the Greenback (USD). Once it cleared the 1.2700 figure, it exposed the 50-day moving average (DMA) at 1.2668, followed by the 1.2600 mark. On the upside, the first resistance would be 1.2700, followed by the day’s high at 1.2750 before 1.2800.