GBP/USD holds steady near 1.2750 ahead of Fed decision

GBP/USD is trading in a narrow 20-pip range around 1.2750, showing limited volatility as markets await Wednesday's Federal Reserve policy decision. The pair has gained 0.2% this week, supported by broad dollar weakness and improving UK economic sentiment. Recent UK data showed services PMI at 53.4, maintaining expansion territory and reducing recession fears. Markets are pricing in a 75% probability of a 25bp Fed rate cut, which could provide additional upside for cable. Technical analysis shows strong support at 1.2700 (psychological level and 20-day moving average), while resistance sits at 1.2800. The pair's implied volatility has dropped to monthly lows, suggesting range-bound trading until the Fed announcement. Traders should watch for any hawkish surprises from the Fed that could trigger dollar strength and pressure sterling lower.