GBP/USD weakens further as markets brace for Fed decision

• Sterling under pressure with scant domestic data; focus on upcoming Fed rate decision.
• Market sentiment favors Fed holding rates steady, with potential cuts later in the year.
• Investors await Fed Chair Powell's press conference for clues on future monetary policy.

The Pound Sterling extended its losses on Wednesday as the Greenback remains firm ahead of the US Federal Reserve's monetary policy decision. An absent economic docket in the UK, except for Bank of England (BoE) Governor Andrew Bailey's TSC hearing, could move the markets ahead of the Fed. The GBP/USD trades at 1.2406, down 0.27%.

GBP/USD dips to 1.2406, losing 0.27% with investors on edge ahead of key Fed monetary policy

Risk appetite improved, but investors remain cautious ahead of the Fed. The odds that the US Central Bank may keep rates unchanged are 98%, though money markets estimate that Powell and Co. would cut rates twice, each 25 basis points (bps), the first in June and the second towards the end of the year.

Market players will be watching Fed Chair Jerome Powell's press conference. According to Brown Brothers Harriman (BBH), they expect Powell to emphasize again that the FOMC can be more cautious as the Fed considers further adjustments to its policy rate.

US economic data revealed on Tuesday showed that Core Durable Goods Orders improved slightly. Following its release, the Atlanta GDP Now model hinted that growth for the last quarter of 2024 might hit 3.2%, up from 3% before yesterday's data.

In the meantime, financial markets recovered following Monday's sell-off after DeepSeek revealed its latest AI model, which was cheaper than OpenAI's or US models and required fewer computer resources.

Throughout the day, GBP/USD traders are waiting for the Fed's decision and the Chair Powell press conference at 18:30 GMT.

GBP/USD Price Forecast: Technical outlook

From a daily chart perspective, the GBP/USD might extend its losses beneath 1.2400, after diving to a new three-day low of 1.2392. On further weakness, the pair could visit January 22 peak at 1.2375, ahead of 1.2350. Momentum turned bearish as seen by the Relative Strength Index (RSI).

In the short-term, the one hour chart indicates that the spot price fell below the 50 and 100 Simple Moving Averages (SMAs), finding acceptance below the latter which is at 1.2431. A drop below 1.2400 will expose the 200-SMA at 1.2353. Conversely, further upside is seen, once buyers lift GBP/USD above 1.2431 and 1.2446, with the latter being the 50-SMA.