Forex
Home›Forex›Major Pairs›Pound strengthens as Fed tightening expectations fade…
Pound strengthens as Fed tightening expectations fade and oil cools
The USD index continues to fall, while GBPUSD has risen to its highest level since early May as markets price fewer Fed tightening moves and more BoE hikes in 2026.
Markets are driving a slide in the US dollar as oil is no longer providing support, with Brent trading near monthly highs while the USD index trends lower, according to Action Forex. The outlet links the shift to expectations that inflation is peaking, alongside reduced urgency for investors to buy the greenback as a safe haven.
Action Forex says that earlier dynamics tied dollar strength to the US-Iran standoff, when a faster move up in Brent boosted inflation expectations and raised the odds of a Fed rate hike. More recently, it points to a month-on-month decline in consumer and producer prices, with investors concluding inflation peaked in May, which lowers the perceived need for Fed tightening and pressures the dollar.
Against that backdrop, sterling has outperformed among G10 currencies over the past month, Action Forex reports, citing reduced political risk and expectations of fiscal consolidation from incoming UK Prime Minister Andy Burnham. The piece also attributes GBPUSD gains to market expectations that the next Chancellor could be less spendthrift than previously feared, pushing GBPUSD to its highest level since early May.
The outlook is further supported by interest-rate divergence, the outlet says, with futures pricing a lower probability of aggressive Fed tightening and signaling confidence in two Bank of England hikes in 2026, the first potentially in September. Action Forex adds that the yen has stayed comparatively contained, with USDJPY remaining range-bound after comments from Japan’s finance minister Satsuki Katayama about measures to encourage GPIF purchases of domestic assets.
Latest closeBrent $85.39 ▲0.8%