GBP\/USD fell below its 200-day Simple Moving Average (SMA) of 1.3331, dropping 0.21% on Tuesday in anticipation of the Federal Reserve’s policy decision. The pair traded under 1.3300, having reached a session high of 1.3356 earlier. <\/p>\n
During the European session on Tuesday, the Pound Sterling remained in a narrow range above 1.3300 against the US Dollar, with market participants waiting for the Federal Reserve’s announcement. Despite some buying in the Asian session, GBP\/USD lacked solid follow-through as traders stayed cautious ahead of the central bank event.<\/p>\n
The US Dollar has gained strength on robust jobs data, which has added pressure on various currency pairs, including GBP\/USD and EUR\/USD. The EUR\/USD saw a retreat towards the 1.1600 level as the market prepared for an anticipated 25 basis point rate cut by the Federal Reserve. <\/p>\n
Other markets observed related movements, such as Gold, holding above $4,200 despite losing momentum. The crypto market experienced mixed signals, with Bitcoin trading above $90,000 while altcoins maintained key support levels amid risk-off sentiment. Ethereum rose 6% driven by whale accumulation and expectations surrounding the Federal Reserve’s decision.<\/p>\n
The entire market is holding its breath for the Federal Reserve’s interest rate decision tomorrow. We are almost certain to see a 25 basis point rate cut, especially after the latest jobs report showed the U.S. economy added a robust 210,000 jobs last month. This strength allows the Fed to frame the cut as a fine-tuning measure rather than a response to an economic crisis.<\/p>\n
For traders focused on GBP\/USD, the recent dip below the 200-day moving average at 1.3331 is a significant bearish signal. While a Fed cut should theoretically weaken the dollar, the UK’s own sluggish Q3 GDP growth of just 0.1% is preventing the pound from gaining any ground. This dynamic suggests that selling call options above 1.3400 could be a viable strategy to capitalize on the pair’s limited upside potential.<\/p>\n
The most direct way to trade this event is through volatility itself. Implied volatility on short-term dollar options has risen sharply, which is typical before a major central bank announcement. We think buying straddles or strangles on major pairs like EUR\/USD could pay off if the Fed’s forward guidance surprises the market and causes a sharp move.<\/p>\n
We must remember what happened during similar periods in the past, such as the Fed’s pivot to cutting rates back in 2019. The initial market reaction is not always the one that lasts, as traders quickly digest the details of the statement and the economic projections. A “hawkish cut,” where the Fed signals it is not planning more cuts, could see the dollar reverse course and rally strongly.<\/p>\n
This environment is also supportive for assets like gold, which has been comfortably trading above $4,200 per ounce. Lower interest rates decrease the opportunity cost of holding non-yielding gold, making it more attractive. However, any indication from the Fed that inflation remains a concern could quickly send gold prices lower.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" GBP\/USD dipped below 200-day SMA as traders awaited Fed decision; Dollar strength pressured major currencies.<\/p>\n","protected":false},"author":62,"featured_media":17032,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36421","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=36421"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36421\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17032"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=36421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=36421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=36421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}