GBP/USD has weakened to approximately 1.3470 during the early Asian session on Wednesday. The Federal Reserve is poised to increase interest rates later on Wednesday. Economists forecast an increase in inflation to 3.1% in August, driven by elevated motor fuel prices. The GBP/USD pair experiences a decline, approaching 1.3470 in the early hours of trading on Wednesday in the Asian market. The US Dollar strengthens against the British Pound on expectations of a US interest rate hike. Traders prepare for the upcoming UK August Consumer Price Index inflation report and the Federal Reserve interest rate decision scheduled for later on Wednesday.
Markets are showing growing confidence that the Fed will raise the benchmark interest rate by 25 basis points at its September policy meeting on Wednesday, a move prompted by the surge in energy prices that has led to a greater-than-anticipated increase in underlying inflation for August. “While markets are prepared for a hike, investors should remain on alert for any surprises, ” said Juan Perez. “You have to be prepared for the unexpected … this is a time of volatility,” Perez said, adding that given Fed Chair Kevin Warsh’s aversion to forward guidance, it was not unthinkable that the US central bank may choose to hold rates. UK August CPI inflation is anticipated to have increased by 3.1% compared to the previous year, rising from 2.9% in July. The core CPI is anticipated to reflect a year-over-year increase of 2.6% in August, consistent with the previous figure of 2.6%.
This inflation report will influence the Bank of England’s decision-making as it approaches its interest rate decision on Thursday. The BoE is anticipated to maintain the interest rate at 3.75% in September, although a rise to 4% is forecasted before the year’s conclusion as inflation pressures increase. Strategists emphasise that the forthcoming UK inflation report is the primary near-term driver for Sterling, characterising the CPI release as “the weekly data highlight.” However, they caution that the outcome is “unlikely to force policymakers to unexpectedly hike on Thursday,” reinforcing the view that, barring a major surprise, the BoE is poised to maintain its current policy stance at this week’s meeting. In the daily chart, GBP/USD is positioned slightly above the 100-day moving average and the lower Bollinger Band, which collectively provide a modest support level.
However, the price continues to trade below the Bollinger midline, thereby maintaining a constrained broader outlook. The Relative Strength Index (14) around 42 indicates a diminishing bullish momentum, resulting in a slight downward bias in the near term as the pair consolidates within these band levels. On the topside, initial resistance emerges at the Bollinger middle band near 1.3550, with a stronger barrier at the upper band around 1.3660, where sellers could reappear if a rebound extends. On the downside, immediate support is observed just beneath the market at the 100-day moving average around 1.3445, bolstered by the nearby lower Bollinger Band near 1.3440; a definitive breach below this cluster would pave the way for a more pronounced pullback within the broader range.
