Ella 
GBP/USD appears to be reversing its losses from last Thursday, trading around 1.2730 in Asia on Monday. However, GBP/USD remained under pressure amid market caution ahead of Wednesday’s Fed rate decision.
The U.S. Dollar Index (DXY) is seeing gains, driven by a rise in U.S. Treasury yields on Friday. The Federal Reserve maintained its hawkish bias, boosting U.S. bond yields, and it is expected that the Federal Reserve will continue to maintain high interest rates amid recent inflationary pressures. However, at press time, the subsequent pullback in U.S. bond yields put pressure on the U.S. dollar (USD).
The CME FedWatch tool shows the probability of a rate cut in March now stands at 1.0%, having dropped to 6.1% in May. The probability of a rate cut in June and July is lower, at 56.3% and 75.2% respectively.
On Friday, the preliminary reading of the U.S. Michigan consumer confidence index fell to 76.5 in March from the previous reading of 76.9. The decline contrasts with expectations for stability. Meanwhile, industrial production rose 0.1% monthly in February, beating expectations of a flat 0.0% and recovering from a 0.5% decline the previous month.
On the other hand, consumer inflation expectations released by the Bank of England (BOE) on Friday rose by 3.0%, down from the previous increase of 3.3%. This data prompted the market to increase bets on an interest rate cut by the Bank of England (BOE) in June, which may suppress the pound (GBP), thus putting the pound/dollar under pressure.
