Scotiabank strategists Shaun Osborne and Eric Theoret report that the US Dollar (USD) is trading narrowly mixed to softer ahead of the Federal Open Market Committee (FOMC) meeting, with swaps pricing a 33% chance of a rate hike. However, the strategists believe the actual risk of a rate increase is much lower than market pricing, and policy changes are unlikely until Federal Reserve operating reviews are completed. They note that if the Fed holds rates and provides no guidance, the USD is likely to ease, with US Dollar Index (DXY) losses below 101.10 signaling further short-term downside for the currency [1].
Meanwhile, the British Pound (GBP) is trading flat around 1.33 against the USD, supported by stronger UK lending data and stabilizing Bank of England (BoE) rate expectations. The GBP/USD pair is consolidating within a tight June range between 1.3150 and 1.3550, with near-term moves expected between 1.3250 and 1.3350. The Monetary Policy Committee (MPC) is anticipated to deliver a hawkish hold at 3.75%. Technical analysis shows the RSI stabilizing in the lower 40s, indicating modest bearish momentum, but the strategists remain neutral absent a break of the established range [2].
Both currencies are experiencing elevated policy risk over the next 24 hours, with the FOMC decision scheduled for 2pm ET and the BoE announcement expected on Thursday. UK fiscal narratives, particularly PM Burnham’s welfare reform plans, continue to influence sentiment toward government debt, while BoE rate expectations are providing modest support to the GBP via yield spreads [2].
Scotiabank analysts emphasize that a Fed hold without guidance would likely cap USD upside and trigger further losses, while the GBP remains range-bound with technical and fundamental factors offering limited directional cues in the near term [1][2].
CONCLUSION
Both the US Dollar and British Pound are trading flat ahead of key central bank policy decisions, with analysts expecting limited immediate changes. The USD faces downside risk if the Fed holds rates without guidance, while the GBP is supported by strong lending data and stable BoE expectations but remains range-bound. Market participants are closely watching upcoming FOMC and BoE announcements for potential shifts in currency direction.