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  • After some choppy post-FOMC price action, GBP/USD has returned to the 1.3500 level from 1.3450 lows.
  • Focus returns to Brexit, with the chances for a deal seemingly feeling a little more upbeat on Wednesday.

GBP/USD saw two-way price action in wake of the latest FOMC rate decision and press conference with Jerome Powell; initially, the pair fell to 1.3450 after the FOMC opted not to increase its monthly asset purchases or tweak the composition of these purchases (a slight disappointment to markets). However, pair soon recovered back to current levels in the 1.3500 region as USD slid amid a dovish sounding post-FOMC press conference in which FOMC Chair Jerome Powell expressed concern for the near-term trajectory of the US economy and hinted that the Fed could ease monetary policy further. After this flurry of activity, focus now returns to Brexit. GBP/USD closed the day with gains of around 0.4% or just under 60 pips.

Brexit hopes rising

Despite comments from the UK PM that a no-deal outcome is still the most likely, analysts are likely to have increased their perceived likelihood that the two sides will reach a deal amid reports of significant progress on one of the key sticking points, that of level playing field. Though gaps remain on this issue, a landing zone is reportedly insight.

Negotiations over fisheries are reportedly proving more difficult, though many analysts expect that the issue of fisheries ought to resolve itself if it was the only outstanding point preventing an overall deal, given that the percentage of UK and EU GDP that fishing communities make up is tiny and both sides of the continent will not see it as in their interest to hurt the rest of the economy just to protect the comparatively small fishing industry.

Market commentators will note further government talk of the potential to recall parliament in order to vote on a deal next week, should a deal be reached by the weekend. If this were to end up happening, GBP/USD would be in for a significant further stretch to the upside.