GBP/USD oversteps 1.2630 as Fed’s policy announcement cheers market mood, BOE eyed

• GBP/USD has surged above 1.2630 as the Fed discarded the odds of a 75 bps rate hike.
• The US economy is strong enough to tackle restrictive monetary policy.
• The BOE will unveil its monetary policy on Wednesday, a 25 bps rate hike looks likely.

The GBP/USD pair is scaling sharply higher as the announcement of the interest rate decision by the Federal Reserve (Fed) has infused fresh blood into the cable. Pound bulls have attracted some significant bids around 1.2483 and have pushed the cable above 1.2630.

Earlier, the asset remained in the bear’s grip amid uncertainty over the rate hike announcement by the Fed. Now, the agency has stepped up its interest rates by 50 basis points (bps) and has provided a roadmap, which is dictating the further action precisely. For the next couple of meetings, Fed has favored consideration of a half-a-percent rate hike and has discarded the odds of a 75 bps rate hike. Also, the balance sheet reduction has been activated to tame the inflation mess. The fed will continue with its restrictive policy till it sees some signs of progress in achieving price stability. Adding to that, the Fed cleared that the US economy can handle the restrictive policy and the agency does not see signs of recession.

Going forward, uncertainty is going to stay a little longer in the cable as the Bank of England (BOE) will come up with its monetary policy announcement on Thursday. BOE Governor Andrew Bailey is expected to elevate its interest rate by 25 bps. Inflation in the UK’s zone has also climbed to the rooftop and the BOE needs to leash it on a serious note.