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BoE meeting seen boosting GBPUSD as September rate hike odds shift

Market pricing shows the chance of a US federal funds rate hike in September falling to 65%, helping weaken the dollar versus major peers.

Reported · Written up by our desk · Major Pairs

Action Forex says the US dollar fell sharply over the past two weeks as investors reassessed expectations for Fed tightening. The outlet links the move to Kevin Warsh signaling a shift toward putting more responsibility for bringing inflation back to the 2% target on financial markets, along with comments that a Treasury yield rally is already tightening financial conditions.

Action Forex reports that those expectations translated into lower odds for Fed hikes, with the probability of a September rate hike sliding from 75% to 65%. It also says the likelihood of two hikes in 2026 dropped from 51% to 44%, contributing to broader dollar weakness even as some risk indicators moved differently, including lower stock indices, higher Treasury yields, and higher oil prices.

The outlet adds that the euro and pound could get support if European central banks maintain guidance on future rate paths. It points to Commerzbank’s view that a Brent crude rally may not necessarily hurt EURUSD and GBPUSD, while noting DBS Group’s assessment that Warsh’s withdrawal of forward guidance is leaving US markets and the dollar less directionally clear.

For sterling specifically, Action Forex highlights the Bank of England meeting, saying traders do not expect a repo rate increase but anticipate hawkish rhetoric amid higher oil and gas prices and the Middle East conflict. It cites futures pricing for a 65% chance of a September hike and nearly two increases by year end, plus Bloomberg forecasts that only two of nine MPC members may vote for a hike, with more votes potentially lifting GBPUSD.

Latest closeWTI crude $84.41 ▲6.5%|Brent $90.40 ▲7.5%

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