GBP/USD muted ahead of Fed rate decision

Philip McHugh September 22nd 2021 - 2 minute read

The pound traded without any strong directional bias on Tuesday as ongoing concerns over the UK’s economic resilience, offset a better-than-expected rise in industrial orders this month.

 Sterling continues to struggle to attract support this morning, with GBP/EUR muted at €1.1643 and GBP/USD flat at $1.3657. GBP/CAD has dipped to CA$1.7453, while GBP/AUD and GBP/NZD retreat to AU$1.8830 and NZ$1.9431 respectively.

Looking ahead, the Federal Reserve is set to conclude its September policy meeting later this evening. Will the bank finally offer more clarity on its tapering plans?

What’s been happening?

The pound struggled to find any meaningful gains yesterday, amid ongoing concerns over the UK’s energy price crisis and its knock-on effect on the wider UK economy.

This offset the publication of the Confederation of British Industry’s (CBI) latest industrial order book balance, which rose to a record high this month.

The US dollar, also traded in a narrow range on Tuesday as USD investors held off on making any aggressive bets ahead of the Federal Reserve’s upcoming interest rate decision.

This subdued trade in USD also came as concerns over the potential collapse of Chinese construction giant, Evergrande began to fade, limiting safe-haven demand.

At the same time, the euro edged higher during yesterday’s session, in spite of a lull in notable EUR economic releases.

What’s coming up?

All eyes will be on the Federal Reserve today as the US central bank delivers its latest interest rate decision.

No policy changes are expected from the Fed this month, but the bank may drop some hints that it will finally start tapering bond purchases from November, which could send the US dollar higher.

The Fed will also deliver its latest economic forecasts this evening. Will this include more modest expectations for growth due to the spread of the Delta variant?

With the Bank of England (BoE) poised to conclude its September policy meeting tomorrow, we may see the pound trade in a limited range today as GBP investors seek to avoid making any aggressive bets.

In the meantime, the publication of the Eurozone’s latest consumer sentiment index could put some pressure on the euro this afternoon, as economists forecast household morale will have continued to weaken this month.

Written by
Philip McHugh

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