The US Dollar (USD) remained broadly steady on Tuesday as global markets focused on the upcoming Federal Reserve (Fed) monetary policy decision, with both the British Pound (GBP) and Australian Dollar (AUD) showing limited movement against the Greenback [1][2]. The GBP/USD pair traded with minimal losses of 0.03%, holding above the 1.3400 level, specifically at 1.3425 at the time of writing [1]. Meanwhile, AUD/USD strengthened to around 0.7070 after the Reserve Bank of Australia (RBA) delivered a hawkish hold, keeping its cash rate unchanged at 4.35% and signaling readiness to raise rates further if needed [2].
The Fed is widely expected to keep interest rates unchanged in the 3.50%-3.75% range for a fourth consecutive meeting, with traders closely watching the Summary of Economic Projections (SEP) and the dot plot, which is anticipated to show a hawkish tilt due to recent increases in energy prices [1][2]. FXStreet's SpeechTracker analysis indicates that six of the eleven voting FOMC members are clearly hawkish, with most others also leaning hawkish, though this does not include the newly appointed Fed Chair Kevin Warsh [2].
Recent geopolitical developments, including the US-Iran Memorandum of Understanding (MOU) set to be signed on Friday in Burgentock, Switzerland, have eased tensions and contributed to lower oil prices [1][2]. This truce has been welcomed by markets, but the earlier surge in energy costs has already pushed US inflation higher, with the Consumer Price Index (CPI) rising to 4.2% year-over-year in May, the highest since April 2023 [2].
On the technical front, GBP/USD maintains a mildly bearish near-term tone, trading below key moving averages at 1.3475, with momentum described as neutral-to-soft and resistance seen at 1.3428 and 1.3475 [1]. The AUD, often seen as a proxy for the Chinese economy, benefited from stronger-than-expected Chinese industrial production data but was capped by weaker retail sales and the steady US Dollar [2].
Looking ahead, the UK will release inflation and jobs data before the Bank of England's (BoE) policy decision, where the Bank Rate is expected to remain at 3.75%. However, money markets are pricing in a potential 33 basis point tightening by the BoE, led by Andrew Bailey, despite the recent US-Iran truce [1].
CONCLUSION
Markets are in a holding pattern as traders await the Federal Reserve's policy decision, with both the Pound and Australian Dollar showing limited moves against the US Dollar. Central bank signals remain hawkish, and recent geopolitical developments have eased some market tensions, but inflation concerns persist. The next moves by the Fed and BoE will be closely watched for further market direction.