GBP/USD + GBP/EUR Market Update

FOMC Decision Day Sharpens GBP Focus as BoE and ECB Loom 24 Hours Away, Wednesday, 29 April 2026

GBP/USD: 1.3506 | GBP/EUR: 1.1537

GBP/USD is trading at 1.3506 this morning, marginally softer than Tuesday's close of around 1.3510, as risk appetite remains cautious ahead of this evening's FOMC statement. GBP/USD extended its daily decline on Tuesday, breaking below 1.3500 at points, as traders turned risk-averse amid the US-Iran stand-off and ahead of the Federal Reserve and Bank of England policy announcements due this week. GBP/EUR at 1.1537 is broadly stable, with the pair's near-term direction hinging almost entirely on the relative hawkishness of the BoE versus the ECB tomorrow.

Overnight and Market Tone:

The FTSE 100 ended Tuesday's session ending a six-day losing streak as energy stocks led gains, with Brent crude rising above $111 per barrel and the Strait of Hormuz still largely restricted, keeping global trade flows under pressure. BP gained 1.1% and Shell rose 1%, with BP also reporting a stronger-than-expected quarterly profit driven by higher oil prices and trading gains despite caution on production. UK 10-year gilt yields pulled back slightly but stayed above 4.95%, approaching levels last seen in 2008, as traders ramped up bets on Bank of England rate hikes. Escalating crude prices and mounting inflation fears are driving the shift, with businesses now expecting CPI inflation to hit 4% over the next year, up from 3.5% in March, according to the Bank of England's Decision Maker Panel. Risk sentiment in European pre-market trade is tentative, with participants reluctant to take large positions ahead of three central bank decisions in the next 18 hours.

UK Data and Bank of England:

At its meeting ending on 18 March 2026, the MPC voted unanimously to maintain Bank Rate at 3.75%. The landscape has shifted materially since that decision. The ONS reported that CPI rose by 3.3% in the 12 months to March 2026, up from 3.0% in February, with CPI rising 0.7% on a monthly basis compared with 0.3% in March 2025. UK services inflation was reported at 4.5% in March, up from 4.3% in February, a reading the MPC watches closely as a proxy for domestic price persistence. Reuters reported that economists mostly expected the Bank to keep rates on hold this week, while some analysts said several policymakers could vote for a rise to stop headline inflation feeding into wages and company prices. The most closely watched signal tomorrow will therefore be the vote split. MUFG's Lee Hardman expects a hawkish hold, with Chief Economist Huw Pill and MPC member Catherine Mann voting for a hike. Standard Chartered takes a more cautious view: "While it would not be a huge surprise if one or two MPC members shifted towards voting for a rate hike, most members will want to wait and see how the situation in the Middle East and energy prices evolves," adding that Governor Bailey is likely to reiterate there would be no rush to judgement given the degree of uncertainty. Investors are now fully pricing in two quarter-point increases in 2026 and assigning a 50% chance of a third hike by year-end, a significant hawkish repricing from the cuts that were expected as recently as February. The Monetary Policy Report, published alongside tomorrow's decision, will be the primary vehicle for the MPC to update its inflation and growth projections in light of the energy shock.

European Backdrop:

According to a Reuters poll of economists, the ECB is expected to hold its deposit rate on 30 April but hike it in June, according to just over half of economists surveyed, in a bid to prevent a war-fuelled energy shock from knocking the euro zone economy off balance. All but one of 85 economists in the April 17-23 Reuters poll predicted the ECB would hold its deposit rate at 2% tomorrow; just over half (44) forecast a June increase to 2.25%, while 40 expected no change. The baseline expectation is that the ECB will maintain a cautious tone, emphasising that risks to both inflation and growth remain significant, with President Lagarde not expected to reveal much during the press conference, though she may provide implicit signals that a summer rate hike is plausible. March eurozone inflation surged to 2.5%, above the 2% target, driven by soaring oil prices, yet core pressures remain contained around 2.3%, supporting a pause amid modest 1% GDP growth forecasts. For GBP/EUR, the 175 basis point carry differential between Bank Rate at 3.75% and the ECB deposit rate at 2.00% remains the structural anchor for GBP outperformance, though any hawkish surprise from Lagarde tomorrow could compress that advantage at the margin.

US Backdrop:

The Federal Reserve will announce its third rate decision of 2026 this evening, with the overwhelming consensus among economists that the FOMC will hold rates steady; the CME FedWatch tool showed a 100% probability of no change to the 3.50%-3.75% target range. In what could be Jerome Powell's final meeting as Federal Reserve chair, he is expected to lead fellow policymakers toward another cautious pause, with stubborn inflation and a resilient labour market leaving little room yet for interest rate cuts. Powell's designated successor, Kevin Warsh, appears on track to take over when Powell's term ends in May. The FOMC statement (19.00 BST) and Powell's press conference (19.30 BST) are the primary USD catalysts this evening; a statement that explicitly signals rates on hold for longer due to Iran-related energy inflation would be USD-supportive and weigh on GBP/USD into tomorrow's BoE decision. Tomorrow also brings the US Q1 2026 GDP advance estimate, with the Atlanta Fed GDPNow nowcast revised down to 1.2% as of late April amid widening trade deficits and weaker industrial production data.

Technical Picture:

GBP/USD: Resistance at 1.3544 (Monday's high), then 1.3600 and the 1.3650 area. Support at 1.3480, then 1.3420 and the 1.3380 region.
GBP/EUR: Resistance at 1.1560, then 1.1597 (2026 year-to-date high set in March). Support at 1.1500, then 1.1460.
Outlook: Both pairs are consolidating within well-defined pre-event ranges; the directional break will almost certainly be driven by the sequencing of tonight's Fed statement and tomorrow's BoE Monetary Policy Report, with a hawkish BoE hold the scenario most likely to push GBP/USD above 1.3600 and GBP/EUR toward 1.1600.

Today's Calendar:

The FOMC decision at 19.00 BST is the sole macro event of consequence today. With a hold fully priced, the market's entire focus will be on whether Powell's statement and press conference signal a more prolonged pause driven by Iran-related energy inflation, or whether the Fed retains optionality for a cut later in 2026; the former outcome would strengthen the USD and push GBP/USD toward the lower end of its weekly range ahead of tomorrow's BoE announcement.

Outlook:

The next 24 hours represent the highest-density event risk of the year for GBP crosses. Tonight's FOMC statement sets the USD baseline; tomorrow's BoE Monetary Policy Report and vote split then determine whether GBP can sustain its recent outperformance. A hawkish BoE hold, emphasising services inflation persistence, could push GBP/EUR toward 1.16-1.17 and support GBP/USD into 1.36-1.37, while a unanimous hold with dovish guidance would expose GBP/USD to a move back toward 1.33-1.34. A divided MPC vote would tell markets that a rate increase remains live, whereas a unanimous hold would give borrowers some breathing space; for UK corporate treasurers, the vote split tomorrow is therefore as important as the headline rate decision itself, and any open USD or EUR transactional exposures due to settle in May or June should be reviewed before the London open tomorrow.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions. Vantry Capital Ltd is authorised and regulated by the Financial Conduct Authority.