• The Pound Sterling falls to 1.2530 as investors turn cautious ahead of the Fed’s policy announcement.
• Investors will also focus on US Manufacturing PMI and labor market data in addition to the Fed's policy.
• Market expectations for UK interest rates will guide the Pound Sterling.

The Pound Sterling (GBP) edges down from a two-week high of 1.2570 but holds above the psychological support of 1.2500 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair comes under pressure as investors await the US Federal Reserve’s (Fed) monetary policy announcement on Wednesday for fresh guidance.

A data-packed week in the United States will keep the US Dollar on tenterhooks. On the other side of the Atlantic, the United Kingdom's economic calendar is light. Therefore, market speculation for the Bank of England’s (BoE) interest rate policy on May 9 will guide the Pound Sterling. The BoE is expected to maintain the status quo, but guidance on interest rates is expected to be slightly on the dovish side.

BoE Governor Andrew Bailey is confident about a sharp decline in the headline inflation of April and sees market expectations for two or three rate cuts this year as reasonable. Also, BoE Deputy Governor Dave Ramsden has predicted that risks of inflation remaining persistent have receded. The BoE could shed more light on the time frame from when it could start reducing interest rates. Market participants remain divided between June or August meetings from when the BoE could pivot to interest rate cuts.