- GBP/USD gains as the US Dollar declines amid high uncertainty for the Fed’s upcoming rate decision.
- Middle East geopolitical tensions and persistent US inflation risks could provide underlying support for the Greenback.
- The Bank of England is widely expected to hold rates at 3.75% after June inflation slowed to 2.6%.
GBP/USD edges higher after remaining flat in the previous day, trading around 1.3300 during the Asian hours on Wednesday. The currency pair gains ground as the US Dollar (USD) struggles ahead of the Federal Reserve’s (Fed) upcoming policy decision.
While the central bank is widely expected to leave interest rates unchanged, traders are currently pricing in an unusually high 30.5% chance of an immediate rate hike, signaling notable uncertainty ahead of the announcement. Looking further ahead, markets are factoring in a 76.6% probability of a rate increase in September, reinforcing expectations that borrowing costs will remain elevated for longer.
Despite its current weakness, the Greenback may find support from renewed hostilities in the Middle East. Re-ignited geopolitical tensions are keeping investor focus firmly on potential inflationary risks and the broader interest rate outlook in the United States.
Meanwhile, investors are also eyeing the Bank of England’s (BoE) upcoming policy decision later this week, where interest rates are widely anticipated to hold steady at 3.75%. This outlook is supported by recent inflation data showing annual consumer price growth slowed to a 15-month low of 2.6% in June, falling below the Bank of England’s previous projections.
