Ella 
In Asia on Wednesday, GBP/USD extended losses for the second consecutive trading day, fluctuating down to around 1.2680. The market maintained risk aversion, pushing investors to pursue the US dollar, which in turn weighed on GBP/USD. U.S. President Joe Biden said the United States would take graded military measures to address the situation following a deadly drone attack on U.S. troops near the border with Jordan and Syria.
The U.S. dollar index snapped a three-game losing streak, rising to around 103.60, despite falling U.S. Treasury yields. As of press time, the two-year U.S. Treasury yields and the 10-year U.S. Treasury yields were 4.31% and 4.02% respectively. Additionally, the Federal Open Market Committee (FOMC) is widely expected to keep interest rates at 5.5% at its meeting on Wednesday.
The CME FedWatch tool puts the probability of the Fed delivering its first rate cut in March at 43%. Additionally, there is a 53% chance of a 25 basis point rate cut in May. Investors are expected to keep a close eye on U.S. ADP employment change data due to be released on Wednesday. The data is typically viewed as a forward-looking indicator for a more comprehensive U.S. non-farm payrolls report due later this week.
The Bank of England (BOE) is expected to keep interest rates unchanged for the fourth consecutive time at its upcoming meeting on Thursday. Bank of England Governor Andrew Bailey mentioned in December that there was “still some way to go” and said the bank believed inflation would not return to its 2.0% target before 2025.
