GBP/USD rallies 42 pips and pops 1.25 the figure as Fed hikes rates 50bps

• GBP/USD rallies on the Fed with a relatively muted response in financial markets.
• The Fed hiked rates by 50 basis points and published plans to reduce the size of the balancesheet. 

At 1.2522, GBP/USD is 0.22% higher and has rallied around 42 pips in the first 15 minutes on the knee jerk after the Federal Reserve hiked rates by 50 basis points. The Fed's target range stands at 0.75% - 1.00%.

The hike was hawkish and Fed futures are pricing in a higher chance of a 50 basis point hike at the June meeting. 77% priced for 50bps and 23% for a 75 basis point hike. Interest rates futures also suggest a 94% probability of an effective fed funds rate of at least 2.75% at year-end.

The Fed anticipates that ongoing increases in the target range will be appropriate as the central banks if highly attentive to inflation risks. 

A press release has also been published with the plans for reducing the size of the balance sheet. 

Nevertheless, the US dollar has been pressured on the release which has buoyed sterling. 

GBP/USD technical analysis

Into the announcements, GBP/USD had been consolidated:

The outcome has done little to shift the structure. On a longer-term basis, GBP/USD has been poised for a downside extension following a brief bullish correction on the daily chart as follows:

If the bulls fail to break beyond the resistance, mounting bearish pressure will likely lead to a downside continuation in due course.