GBP/USD little changed just above 1.3500 post-Fed policy announcement as Powell presser gets underway

GBP/USD saw a choppy post-Fed reaction, swinging from just above 1.3500 pre-announcement to as high as the 1.3520s and then lower again to current levels around 1.3510. All said, there hasn’t been much follow-through in terms of an FX market reaction in wake of the Fed’s latest monetary policy decision, which seemed to go down pretty much bang in line with expectations. Interest rates were left on hold as expected and while the Fed didn’t explicity say it would hike rates in March, it said (as expected) that it would soon be time to hike interest rates.

The Fed reiterated that its QE programme would come to an end in March and that it expects to commence reductions in the size of the balance sheet after the process of lifting interest rates has gotten underway. So all in all, nothing new from the Fed’s latest monetary policy statement or rate decision hence the lack of GBP/USD volatility. Attention now turns to Fed Chair Jerome Powell’s press conference, which commences at 1930GMT. Powell will likely be quizzed on topics such as the potential number of/pace of rate hikes in 2022 and beyond, as well as how the discussion regarding quantitative tightening is going. Any more specifics on either of these two topics would be of great interest to market participants.

But Powell is usually a pro at not saying anything that rocks the boat too much during the press conference, so the scope for further FX market volatility may be fairly low. That may mean GBP/USD remains contained within recent 1.3490-1.3530ish ranges. But a lack of surprises from Powell often help risk appetite and gains in risk assets could help give risk-sensitive currencies such as GBP a lift.