GBP/USD exposed to downside after hesitant FOMC outlook, surprise UK election announcement

• GBP/USD is easing back from Wednesday’s early gains after FOMC showing.
• UK PM Sunak calls for general election July 4 in a bid to hold power.
• Rate cuts in 2024 look less likely, investors bid up Greenback.

GBP/USD is pulling back from Wednesday’s early gains after the Federal Reserve’s (Fed) latest Meeting Minutes showed the Federal Open Market Committee (FOMC) remains deeply skeptical that inflation will ease to 2% quickly enough to spark rate cuts as soon as investors continue to hope for.

The FOMC have been knocked into a second-guessing stance after the first quarter’s inflation figures from the US broadly disappointed central planners. With US inflation proving stubborn, the Fed continues to debate the “restrictiveness” of current policy. The FOMC did not rule out a September rate cut outright, but rate-trim-hungry investors were hoping for a far more dovish showing from the FOMC’s Meeting Minutes.

Read more: Fed Minutes leave the door open to a probable rate cut in September

UK Prime Minister Rishi Sunak has called for a surprise general election for July 4 in a high-risk bid for the Tories to maintain a 14-year leadership streak. Initial polling shows PM Sunak’s Tory party trailing their opposition, the UK’s Labour Party, by 20 points.

Keir Starmer, the leader of the UK’s Labour Party is broadly expected to win the next election, and PM Sunak’s snap election call is reigniting speculation that members of the Tory Party are delivering no-confidence letters in the current PM’s leadership behind closed doors.

The UK’s Parliament will be dissolved on May 30 as the UK gears up for a short-notice election.

GBP/USD technical outlook

The Cable is grinding backwards on Wednesday, erasing the day’s early gains after the pair rose to an intraday high near 1.2760. GBP/USD is holding above the 1.2700 handle, but topside momentum has been halted and the GBP is close to flat on the day against the Greenback.

GBP/USD has been on an upside climb recently, closing in the green for all but one of the last nine consecutive trading days. However, the Cable remains down from March’s high bids near 1.2900 and bullish momentum remains limited north of the 200-day Exponential Moving Average (EMA) at 1.2543.

GBP/USD hourly chart

GBP/USD daily chart