GBP/USD holds below 1.2850, all eyes on Fed rate decision

• GBP/USD trims losses around 1.2840 in Wednesday’s early Asian session.
• The Fed is anticipated to leave interest rates unchanged at its July monetary policy meeting on Wednesday.
• The GBP weakens amid the speculation that the BoE would begin cutting rates from the August meeting. 

The GBP/USD pair remains on the defensive near 1.2840 during the early Asian trading hours on Wednesday. The markets might turn cautious ahead of the Federal Reserve (Fed) Interest Rate Decision on Wednesday, followed by the Bank of England (BoE) policy meeting on Thursday. 

The Fed is expected to hold interest rates steady at its July monetary policy meeting on Wednesday. The US central bank has been holding its benchmark funds rate in a range of 5.25-%-5.50% since July 2023, making the longest period of restrictive monetary policy in decades. 

Market players will keep an eye on remarks from Chair Jerome Powell for more cues on the future path of policy rates. The markets expect the Fed to start easing its policy as soon as September as inflation edged nearer to the Fed’s 2% target. 

Data released on Tuesday showed that US JOLTS Job Openings declined to 8.184 million in June, compared to May’s revised figure of 8.23 million, above the market expectation of 8.03 million. Meanwhile, US Consumer Confidence rose to 100.3 in July from the revised figure of 97.8 in June. This figure came in above the market consensus of 99.7, according to the Conference Board. 

On the GBP’s front, investors continued to price in a potential rate cut by the BoE on Thursday, which dragged the Pound Sterling (GBP) lower against the USD. Trades see nearly 58% odds that the BoE will lower its borrowing costs by 25 basis points (bps) to 5%, Reuters reported.