GBP/USD Sticks To Gains Above 1.2500 Amid Weaker USD, Traders Keenly Await FOMC Decision

The GBP/USD pair regains positive traction on Wednesday and snaps a two-day losing streak to a nearly one-week low, around the 1.2435 regions touched the previous day. The pair maintains its bid tone through the first half of the European session and is currently placed near the top end of its daily range, just above the 1.2500 psychological mark.

The US Dollar (USD) drifts lower for the second successive day and retreats further from a three-week high touched on Tuesday, which, in turn, is seen as a key factor pushing the GBP/USD pair higher. The overnight release of the US Job Openings and Labor Turnover Survey (JOLTS) indicated that the ultra-tight US job market is loosening. Apart from this, concerns over the US debt ceiling and renewed fears of a full-blown banking crisis drag the US Treasury bond yields lower and continue to weigh on the Greenback.

Apart from this, a modest recovery in the US equity futures undermines the safe-haven buck and lends additional support to the GBP/USD pair. However, the upside seems limited ahead of the highly-anticipated FOMC monetary policy decision. The Federal Reserve (Fed) is widely expected to hike rates by 25 bps and could soften its hawkish stance amid slowing economic growth. Investors, however, remain divided over the possibility that the Fed will announce a pause in its rate-hiking cycle as inflation is still trending well above the target.

Hence, the accompanying monetary policy statement and Fed Chair Jerome Powell’s comments at the post-meeting presser will be scrutinized closely for clues about the future rate-hike path. This, in turn, will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Heading into the critical central bank event risk, traders on Wednesday might take cues from the US economic docket – featuring the release of the ADP report on private-sector employment and the ISM Services PMI.

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