Pound Sterling Continues To Correct Against US Dollar As Fed Maintains Restrictive Policy
The pound (GBP) extended its correction to near 1.2920 against the US Dollar (USD) during European trading hours on Friday (3/21). The GBP/USD pair weakened as the US Dollar extended its recovery amid growing expectations that the Federal Reserve (Fed) will not cut interest rates soon. The US Dollar Index (DXY), which tracks the value of the Greenback against six major currencies, gathered strength to break above the key resistance of 104.00.
The Fed stated that it is in no hurry to move to cut interest rates after leaving them unchanged in the range of 4.25%-4.50% on Wednesday. The Fed's comments on keeping interest rates at current levels were based on "very high" uncertainty over the US economic outlook due to the implementation of significant policy changes under US President Donald Trump. Fed Chairman Jerome Powell said in a press conference on Wednesday that US President Trump's tariff policies could push inflation higher and weigh on growth in the near term.
According to the CME FedWatch tool, the Fed is almost certain to keep rates unchanged at its May meeting, but there is a 73% chance the central bank could cut rates in June.
Globally, investor risk appetite is expected to remain limited as President Trump is set to impose reciprocal tariffs on April 2, meaning the same tariffs on the same products imported and exported by the US as its trading partners. Such a scenario would not be good for economic growth worldwide.
Source: FXStreet
