Bank of England and Federal Reserve rate decisions drive GBP/USD focus

The British Pound remains near 1.35 against the US Dollar as markets await critical interest rate decisions from both the Bank of England (BoE) and the Federal Reserve. UK gilt yields have reached 19-year highs, with the 10-year yield exceeding 5.20%.

The Bank of England is expected to hold its current rate at 3.75% following a split vote, though markets are pricing in at least three to four rate hikes by mid-2027. Meanwhile, the Federal Reserve is anticipated to raise its rate, potentially widening the interest rate gap between the two central banks in favor of the US Dollar.

UK inflation forecasts suggest consumer prices may reach 3.1% for the year to August, hitting the Bank’s projected peak earlier than expected. While stronger UK GDP data has supported the Pound, analysts remain divided on its short-term trajectory depending on the BoE's monetary policy stance.