• The Pound Sterling exhibits strength above 1.2500 as the Fed’s guidance on interest rates was slightly less hawkish than expected.
• Fed’s Chair Jerome Powell said he is still confident about a reduction in interest rates this year.
• The BoE is expected to hold interest rates steady at 5.25% for the straight sixth time at its May 9 meeting.

The Pound Sterling (GBP) capitalizes on cheerful market sentiment and holds gains above the crucial resistance of 1.2500 in Thursday’s London session. The GBP/USD pair is slightly down from its previous close of 1.2526, but clings to recent gains. This strength in the Cable is driven by a weaker US Dollar,   which was battered by the Federal Reserve’s (Fed) guidance on interest rates, which was less hawkish than feared, after keeping them unchanged for the sixth straight time.

The commentary from Fed Chair Jerome Powell in the press conference after the monetary policy meeting showed that he still sees the central bank pivoting to interest rate cuts this year even though he remains worried over stalling progress in inflation declining to the 2% target. When asked about the Fed’s stance on interest rate cuts, Jerome Powell said that he expects inflation to fall over the course of the year, but that "my confidence in that is lower than it was." 

About the inflation outlook, Fed Chair Jerome Powell said that price growth  “is still too high," adding that "further progress in bringing it down is not assured and the path forward is uncertain."

Apart from the Fed’s less-hawkish outlook, the sharp decline in the pace of balance sheet tapering suggested that the central bank is still leaning towards quantitative easing.