Sterling drifted lower in early NorAm trade, flirting with support at 1.24, and could face further downward pressure if the Fed holds rates steady as expected later on Wednesday and the BoE cuts on Feb. 6, especially as tariff uncertainties gear up next month.
Support just below 1.24 is holding, though given monetary and fiscal outlooks it seems reasonable that a top may have been put in at Monday's high by 1.2523. Lower long-term Treasury yields offer sterling bulls little solace as gilt yields are following a similar path, though the lower rates do assuage UK fiscal concerns that pushed the pound to a 2025 low at 1.21 earlier in January.
However, with rate expectations and Trump tariff concerns dominating markets the broad dollar bid is likely to continue weighing on GBP/USD.
On the rate horizon, pundits are divided on Fed policy in 2024, with
expectations ranging from 1-2 cuts in 2025, to no cuts and even a possible hike.
Today's Fed presser will be parsed for clues to the near-term path of policy,
though markets are likely to expect Fed Chair Jerome Powell to reiterate data
dependency and unwillingness to speculate on monetary policy while fiscal policy
remains in a state of flux.
GBP Chart:
(Paul Spirgel is a Reuters market analyst. The views expressed are his own)