Key events today:

18:00 UTC: USD – FOMC Interest Rate Decision

The GBP/USD pair remains stable after losses in the previous session, trading around 1.2440 during Asian hours on Wednesday. The decline in the pair may be attributed to increased risk aversion following U.S. President Donald Trump’s tariff threats.

On Monday evening, President Trump announced plans to impose tariffs on imports of computer chips, pharmaceuticals, steel, aluminum, and copper. The goal is to shift manufacturing back to the United States and support domestic production.

Additionally, GBP/USD may continue to weaken as the U.S. dollar gains support from the Federal Reserve’s cautious stance ahead of Wednesday’s policy decision. According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will keep the rate within the target range of 4.25-4.50%. However, traders will closely monitor Fed Chair Jerome Powell’s press conference for any hints on the future direction of monetary policy.

The British pound (GBP) remains under pressure amid growing concerns about stagflation risks in the UK economy, driven by weakening labor demand and persistent inflation. Traders currently anticipate a 25 basis-point rate cut in the Bank of England’s (BoE) first monetary policy decision of 2025 on February 6, which would lower borrowing rates to 4.5% amid weak economic prospects.

Despite optimistic remarks from UK Prime Minister Keir Starmer about the economy in a Bloomberg interview on Tuesday, the British pound remains cautious. Starmer emphasized that the Labour government’s top priority is “growth” and noted that the economy is beginning to “turn around.” He also highlighted the strong trade ties between the United States and the United Kingdom, stating, “We already have a huge volume of trade with the United States, and there is a foundation for even better trade relations. We must expand them.”

Recommendation: Primarily trade with Sell orders from the current price level.