Sterling erased most of its gains on Monday, hitting a session low by 1.3867 nL1N2MJ16I after mixed U.S. durable goods data nAQN02AQE8, as markets geared up for the Fed meeting later in the week.
GBP/USD has been anchored near the top of its recent range, between its upper and lower 30-day Bollis, so it would take an unexpectedly dovish message from the Fed for sterling to break higher and test 2021 and multi-year highs by 1.4240.
The Fed is seen likely to maintain its low-for-longer mantra while underscoring its flexibility if the highly anticipated rise in inflation turns out to be non-transitory.
U.S. Eurodollar futures 0#ED: continue to hint the first Fed hike coming in December 2022.
With universal agreement among 93 firms polled by Reuters CBP that the fed funds rate will remain steady, traders will scrutinize the statement and news conference for any hints that policymakers are ready to begin talking about tapering asset purchases at some point.
After U.S. durable and Germany's IFO, which missed forecast nL8N2MJ1X0, markets are also awaiting Thursday's U.S. Q1 GDP data, EM with forecasts ranging from 2.6% to 10%, and Friday's PCE report.
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