Following the Federal Reserve's announcement that it's premature to reduce interest rates, the USD is displaying strength compared to most currencies. On Thursday, the GBP/USD exchange rate declined by 0.30% to 1.2650 after the Fed, led by Chair Jerome Powell, opted to keep interest rates unchanged, expressing uncertainty about rate cuts in March.

Contrary to expectations, the Fed refrained from hasty rate cuts, allowing the USD to regain some footing after a turbulent trading session following the FOMC meeting. Powell emphasized the importance of waiting for additional data before considering monetary policy adjustments. This cautious approach led to a sell-off in stock markets, with investors anticipating prolonged higher interest rates in the U.S. Consequently, the USD strengthened against all G10 peers on the day.

Powell indicated that, based on current data, he doesn't foresee the necessity for a rate cut at the March meeting. The Federal Reserve's stance now sets the stage for the Bank of England's decision, expected at mid-day. It is anticipated that the Bank of England will echo the Fed's cautious approach, emphasising the importance of awaiting more data before contemplating a reduction in interest rates.