GBP/USD hits seven-week low following divergent central bank decisions

The British Pound fell to seven-week lows against the US Dollar, with the GBP/USD exchange rate reaching approximately 1.3365. This decline follows divergent monetary policy decisions between the Federal Reserve and the Bank of England.

The Federal Reserve increased benchmark interest rates by 25 basis points to a range of 3.75%-4.00%. The decision was unanimous, and the updated dot plot indicated that 16 of 18 policymakers anticipate at least one more rate increase before the end of 2026. Fed Chair Kevin Warsh maintained a hawkish tone regarding the economy.

In contrast, the Bank of England held its interest rate steady at 3.75%, although three committee members voted for a hike. While stronger-than-expected UK retail sales provided some local support for the Pound, the interest-rate advantage held by the US Dollar continues to exert downward pressure on Sterling. Analysts suggest that as long as the market expects further Fed tightening, a gradual decline in the GBP/USD pair may continue.