GBP/USD Forecast: Pound Steady vs Dollar Despite Fed’s Hawkish Hold

January 31, 2025 - Written by Tim Boyer

STORY LINK GBP/USD Forecast: Pound Steady vs Dollar Despite Fed’s Hawkish Hold

The British Pound (GBP) was steady against the U.S. Dollar (USD) on Thursday, as the Federal Reserve’s latest interest rate decision failed to impact the pairing significantly.

At the time of writing, the Pound US Dollar (GBP/USD) exchange rate was trading at $1.2449, virtually unchanged on the day.

The Pound (GBP) saw muted movement on Thursday, holding steady against many of its peers amid a continued absence of UK economic data.

However, the increasingly risk-sensitive currency found some support from a broadly positive market mood, helping to limit any losses.

Meanwhile, Chancellor Rachel Reeves faced media scrutiny over her economic growth plans. While her proposals aimed at revitalising the economy, investors remained cautious, as many of the suggested measures were expected to take time to yield tangible results.

The US Dollar (USD) remained stable on Thursday morning following the Federal Reserve’s latest interest rate decision.

As expected, the Fed kept rates unchanged, with Chair Jerome Powell emphasising a cautious approach, stating that the bank wanted to assess economic developments before committing to any rate cuts.

This stance drew criticism from President Donald Trump, who pledged to push for lower interest rates as part of his campaign. Concerns that he may challenge the Fed’s independence appeared to cap USD’s gains after the central bank’s hawkish hold.

Additionally, the Dollar traded sideways as markets awaited the release of US fourth-quarter GDP data later in the day.

Looking ahead, the Federal Reserve’s preferred inflation gauge – the core PCE price index – is set for release on Friday afternoon. If the data confirms that US inflation remained high in December, as expected, it could strengthen the US Dollar by reinforcing expectations that the Fed will maintain higher interest rates for longer.

Meanwhile, the UK economic calendar remains light, which may keep GBP movement subdued.

However, as the Pound has become increasingly sensitive to risk sentiment, a shift in market mood could drive volatility. If risk appetite declines, Sterling may face pressure.

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TAGS: Pound Dollar Forecasts