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USD, GBP Action Ahead of FOMC and BOE Announcements

The Federal Open Market Committee (FOMC) is expected to retain the current interest rates when it announces its decision following its first meeting of 2024. When Fed Chairman Jerome Powell steps out to make the announcement at 2pm Eastern Standard Time on Wednesday, analysts expect him to announce that rates will remain unchanged, albeit with a possibility of a marginal difference.

The committee is expected to maintain the goal range of 5.25-5.50%, in line with most projections. Similarly, the Bank of England is expected to announce the UK’s interest rates on the back of a notable slowdown in inflation.

No rate changes expected, yet surprises could lie elsewhere

The Fed announced earlier that it projects a 75-basis-point (bps) cut to interest rates in 2024 at its most recent monetary policy meeting.  The FOMC will likely recognise the achievements realised so far in its efforts to bring inflation down to its targeted rate of 2%, but is expected to stress the need to keep pushing towards the goal. Recent survey by Bloomberg indicates that experts anticipate the Fed’s favoured inflation measure to decline to 2.2% by the year’s end.

Leading currencies including the British Pound, the euro and Swiss franc will likely delay any significant action, at least until both the Fed and the Bank of England (BOE) announce new rates. The GBP is expected to remain under pressure, much as the BOE will almost certainly retain the same rates that have been operational for the last four months.

According to comments made by Fed Chairman Jerome Powell last month, rate cuts are still on the table, regardless of whether or not the US economy experiences a recession in 2024. Apart from the Fed decision, the market will be reacting to the scheduled releases of critical data on the Employment Change data for January, the Manufacturing PMI, and Nonfarm Payrolls (NFP) data, expected to come out on Thursday and Friday, respectively.