GBP/USD dives after Fed's hawkish pause
- GBP/USD declined towards 1.2330 after the release of the Fed's statement
- The Fed held rates steady at 5.25% -5.50% as expected.
- The dot plot projections were kept at 5.6%.
Following the Federal Reserve (Fed) decision, the GBP/USD fell to a low of around 1.2330 and then recovered to 1.2365. The USD measured by the DXY index recovered back above 105.00, while the US Treasury yields are reversing their course, clearing daily declines with the 2,5 and 10-year rates standing at 5.14% (high since 2006), 4.54% (high since 2007) and 4.35% respectively.
The policy statement revealed that the Fed decided to hold rates at the 5.25%-5.50% range. Regarding the famous dot plots, they showed that 12 members of the Federal Open Market Committee (FOMC) are still seeing one more 25 basis point hike as the median projections stood at 5.6%. In addition, on the economic forecast front, Unemployment and Core Personal Consumption Expenditures (PCE) inflation estimations were downgraded while the Gross Domestic Product (GDP) projections were revised to the upside. Moreover, the longer-run interest rate was revised from 2.8% to 3.3% and seems to be spooking investors and benefiting the USD. Overall, the Federal Reserve is aggressive on interest rates but optimistic about the US economy.
Focus now shifts to Chair Powell's presser.
GBP/USD Intra-day chart
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Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
