It’s Fed Day: Powell's Next Move Has Everyone Guessing

The Fed speaks today, the BoE and ECB follow tomorrow, and Tehran still won't budge. FX sits in tight ranges as central banks queue up , sterling cools, the euro consolidates, and the dollar steadies on safe-haven demand. Powell steps up for what could be his final press conference as chair. Energy prices keep inflation risks simmering in the background.

---

GBP: Sterling Grips the Edge

GBPUSD 1.3504 | EURGBP 0.8663

Sterling maintains a narrow corridor against the dollar while both the pound and the euro retreat from their recent monthly peaks. Thinned Asia trade, courtesy of a Japanese bank holiday, leaves the currency vulnerable, awaiting the Bank of England (BoE)’s rate decision tomorrow. Meanwhile, the diplomatic stalemate between Washington and Tehran persists. Trump’s rejection of the latest nuclear proposal keeps the global mood fragile, pinning the pound to the floor.

The BoE is likely to hold rates at 3.75%. Policymakers are buying time to assess the energy crunch, yet a quiet divergence is brewing. BoE Governor Andrew Bailey previously cited a weak labour market as a reason for restraint, but recent robust GDP data suggests inflation risks haven't vanished. The more significant read will come from the vote split and Governor Bailey's language. A unanimous hold gives breathing room; a split vote keeps a potential hike alive. Previous rate hikes have already cooled economic activity, leading some to whisper about rate cuts by year-end, yet the war-driven energy spike forces a hawkish posture.

UK CPI rose to 3.3% YoY in March, up from 3.0% in February, with motor fuels making the sharpest contribution. The BoE cannot produce more oil, but it could signal that it will not allow energy-driven price rises to embed in wages, contract renewals, and markets will be listening closely for that signal.

Swap rates rose sharply when the Middle East conflict began; they have since pulled back as hike expectations eased, allowing some lenders to trim fixed mortgage rates. Whether that easing holds depends almost entirely on the tone of tomorrow's statement. Markets have partially priced in two rate hikes for later this year. The more hawkish members of the 9-person Monetary Policy Committee (MPC) may push for an immediate move; the majority might appear inclined to wait and watch.

Key Technical levels for the GBP/USD pair: Resistance sits at 1.3550 and Support sits at 1.3450

Key Technical levels for the EUR/GBP pair: Resistance sits at 0.8700 and Support sits at 0.8650

---

EUR: Euro Consolidates Ahead of Dual Decisions

EURUSD 1.1706

The euro briefly dipped to $1.1676 before finding a temporary floor. It now consolidates within a tight range near 1.1700, mirroring the hesitant energy of the wider market. German preliminary HICP inflation data for April, due today, is forecast to accelerate to 3.0% YoY from 2.7% in March. A firmer print could add modest support to the euro ahead of the European Central Bank (ECB) meeting tomorrow.

The European Central Bank (ECB) faces a classic squeeze. The Strait of Hormuz closure has pushed energy price volatility into the eurozone's inflation outlook in a way that leaves the governing council little appetite for surprises. High uncertainty points to a hold on rates this Thursday, yet energy-led inflation makes a June hike nearly inevitable. Structural shifts suggest two 25bps hikes in the coming months, one in June and another in September, to pull the deposit rate back to 2.50%. ECB President Christine Lagarde’s press conference will be the true oracle here; her tone will dictate whether the euro breaks its sideways crawl.

Both the Fed and the ECB face a structurally similar dilemma: elevated energy-driven inflation amid slowing growth and geopolitical uncertainty. Neither central bank is in a position to move aggressively in either direction, which explains the sideways price action across EUR/USD. Direction is more likely to come from the tone of the press conferences than the rate decisions themselves.

Key Technical levels for the EUR/USD pair: Resistance sits at 1.1745 and Support sits at 1.1690

---

USD: The Dollar Awaits a New Era

DXY 98.72 | USDCAD 1.3689

The dollar stands firm as the world braces for the Federal Reserve’s (Fed) decision. This meeting likely marks Jerome Powell’s final act as Chair. The dollar index (DXY) edged up 0.1% to 98.72, underpinned by safe-haven demand as Iran ceasefire talks hit a wall. In the background, US Consumer Confidence beat expectations at 92.8, proving the American consumer remains resilient despite the geopolitical storm.

Fed funds futures price a 100% probability of a hold at 3.50%-3.75%, according to CME FedWatch data. The US 10-year Treasury yield ticks up marginally to 4.346%. Meanwhile, the Canadian dollar strengthened to $1.3676 ahead of the Bank of Canada’s (BoC) own policy update.

Today's FOMC meeting is widely expected to be Jerome Powell's last press conference as chair. His term ends on 15 May. Crucially, his tenure as a Fed governor runs until January 2028, meaning he can remain on the board even after stepping down as chair, a question he has not yet answered publicly. The Senate Banking Committee votes today on Kevin Warsh's nomination to succeed him. Warsh served as a Fed governor between 2006 and 2011 and told senators at his confirmation hearing last week that he would operate independently of the White House.

Powell is expected to strike a hawkish tone at today's press conference, given that most dovish FOMC members have shifted their language in recent weeks amid persistent energy-driven inflation. With inflation risks skewed to the upside and the cost of holding firm relatively low, the path of least resistance for the statement is likely the one that preserves flexibility rather than promises relief.

Separately, the Wall Street Journal reported Tuesday that President Trump has instructed advisers to prepare for an extended blockade of Iran; a development that kept risk appetite in check and reinforced the dollar's near-term bid.

We are entering a transitional era for the world’s reserve currency. The combination of a leadership change and a geopolitical blockade creates a unique environment for the dollar.

---

Pacific Pressure and Oil Shocks

AUDUSD 0.7164 | NZDUSD 0.5862 | USDJPY 159.55 | GBPJPY 215.64

The yen teeters on the edge of 160.00, largely overlooking the Bank of Japan’s (BoJ) recent hawkish hold. Intervention risks are high, keeping traders on high alert. Down under, the Australian dollar slipped after core inflation cooled slightly more than forecasted, while the New Zealand dollar eased as the RBNZ focused on a stable recovery.

The BoJ would likely have hiked rates already if not for the war. Their path remains gradual, leaving the yen exposed to the dollar’s dominance. Meanwhile, the UAE’s surprise exit from OPEC initially rattled the oil market, but with production already near capacity, Brent Crude quickly recovered its losses. The global economy feels the squeeze of the Strait of Hormuz, and OPEC uncertainty keeps energy prices volatile. That feeds into global inflation expectations and shapes currency movements.

FX outside the majors reacts to a mix of policy divergence and commodity signals. Price action reflects both local data and global risk drivers.

---

Current Rate Table:

---

Market Lookahead

Wed, 29 April

• Eurozone Consumer Confidence (Apr)
• Germany CPI and HICP (Apr)
• BoC Interest Rate Decision
• Fed Interest Rate Decision

Thu, 30 April

• Eurozone HICP and Core HICP (Apr) and Q1 GDP
• BoE Bank Rate decision
• ECB Rate on deposit facility
• US CPI and Q1 GDP

---

Stay Ahead in the Currency Game

Whether you're a daily FX trader or handle international transactions regularly, our 'Currency Pulse' newsletter delivers the news you need to make more informed decisions. Receive concise updates and in-depth insights directly in your LinkedIn feed.

Subscribe to 'Currency Pulse' now and never miss a beat in the currency markets!

---

Ready to act on today’s insights? Get a free quote or give us a call on: +44 (0)20 7740 0000 to connect with a dedicated portfolio manager for tailored support.

---