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Pound slips below 1.3300 ahead of Fed and BoE decisions
The GBP is set to end the past two weeks down nearly 1.2% versus the US dollar, as policy divergence and UK fiscal concerns weigh on sterling.
The British pound was pressured against the US dollar, trading below 1.3300 and staying near flat on the day, according to FXStreet. The move keeps the currency on track for a nearly 1.2% decline over the last two weeks.
FXStreet links the weakness to concerns around UK Prime Minister Andy Burnham’s welfare reforms and to monetary policy divergence between the Federal Reserve and the Bank of England. It notes the Fed is expected to hold rates, with markets pricing about a one-in-three chance of a quarter-point hike.
A surprise Fed hike would likely strengthen the US dollar broadly, but even the base case is viewed as more hawkish than the BoE. FXStreet says the more likely outcome is a pause that still leaves the door open for a hike in September, which would reinforce the pair’s bearish bias.
On Thursday, the BoE is widely expected to keep interest rates unchanged, with attention focused on the number of hawkish dissenters. FXStreet adds that ING called the BoE meeting the main event, citing a view that if inflation expectations remain contained, the bank may leave rates unchanged for the rest of the year, while warning that dovish repricing is a key near term risk for sterling. It also points to resurfaced concerns about fiscal stability tied to Burnham’s pledges to reduce the cost of living, including cuts to electricity bills and transport caps, with investors weighing where the funding would come from after the 2022 debt crisis.