The GBP/USD pair remains defensive at around 1.2960 as the US dollar (USD) retains broad strength following the Federal Reserve’s (Fed) March policy decision and cautious outlook from the Bank of England (BoE).

As expected, the Fed kept interest rates unchanged at 4.25%-4.50%, while the updated Summary of Economic Projections (SEP) reaffirmed policymakers’ outlook for 50 basis points (bps) of rate cuts in 2025. Although the USD initially struggled to rally, it gained traction after Fed Chair Jerome Powell’s press conference. Powell emphasized that the Fed is in no rush to cut rates and could maintain a restrictive policy stance for longer if economic conditions remain strong.

In the UK, the Office for National Statistics (ONS) reported that the ILO Unemployment Rate remained steady at 4.4% in the three months to January, aligning with market expectations. Employment Change increased by 144,000, reflecting resilience in the labor market. However, wage growth softened, with Average Earnings, Including Bonuses, falling to 5.8% from 6.1%, potentially reducing inflationary pressures.

The BoE is widely expected to keep its policy rate at 4.5% in Thursday’s meeting. Without a press conference scheduled, market focus will shift to the vote split among policymakers. If three or four Monetary Policy Committee (MPC) members vote for a rate cut, the British Pound (GBP) could face immediate selling pressure. Conversely, a unanimous decision to hold rates steady might support GBP/USD.

Trade Idea: Consider selling GBP/USD near 1.2980, targeting 1.2880, as Fed hawkishness and BoE caution may keep the Pound under pressure in the short term.