GBP/USD jumps to one-month high following dovish Fed meeting

The US dollar came under some heavy selling pressure on Wednesday, after the Federal Reserve struck a dovish chord in its latest policy statement.

Meanwhile the pound is trading broadly flat so far this morning, with GBP/EUR muted at €1.1751 and GBP/USD climbing to $1.3947. GBP/CAD is rangebound at C$1.7399, while GBP/AUD and GBP/NZD are holding steady at AU$1.8863 and NZ$1.9973 respectively.

Coming up, will a strong US GDP reading in the second quarter help to propel the US dollar higher this afternoon?
 

What’s been happening?

The US dollar initially trended higher through yesterday’s European trading session, with the ‘greenback’ attracting skittish investors in the run up to the Federal Reserve’s latest policy statement.

However, USD exchange rates subsequently fell back after the Fed left its monetary policy unchanged and avoided discussing the tapering of its stimulus programme.

The euro, meanwhile, spiked on Wednesday amidst the sharp pullback in the US dollar, although these gains were tempered somewhat as Germany’s latest consumer confidence index printed below expectations.

At the same time, the pound traded in a narrow range yesterday, in the wake of comments by Boris Johnson regarding the UK’s post-pandemic recovery.

The Prime Minister predicts that the UK will see a ‘steady’ recovery, but stressed that there may still be some ‘bumps in the road’ over the next year.
 

What’s coming up?

Looking ahead, it seems safe to assume that the primary focus today will be on the publication of the latest US GDP release.

The preliminary reading for the second quarter is expected to report that the US economic recovery continued to gather pace, likely bolstering the appeal of the US dollar.

Also potentially lending support to the ‘greenback’ will be latest US initial jobless claims, which are expected to report new claims fell last week.

In the meantime, the publication of Germany’s consumer price index could strengthen the appeal of the euro this afternoon, amidst forecasts inflation in the Eurozone’s largest economy accelerated sharply this month.

Finally in the continued absence of any notable UK economic releases, GBP investors are likely to remain focused on domestic coronavirus developments. Will a resurgence in UK cases temper demand for the pound?