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GBP/USD holds below 1.3550 as Fed vs BoE expectations set the tone
Sterling is trading just under 1.3550 after Labor Day left US desks shut, with the pair still reflecting a USD-rate edge tied to US payrolls that recently surprised to the upside.
FXStreet said GBP/USD was holding just under 1.3550, after a relatively quiet Monday with American desks closed for the Labor Day holiday.
The week’s focus is expected to be on US and UK data, with FXStreet pointing to Friday’s US Nonfarm Payrolls as the last major driver. It noted the report came in at 162K versus a 56K consensus, sending GBP/USD down by 57 pips to just under 1.3500 within minutes before recovering about two thirds later in Europe.
FXStreet also framed the bigger driver as interest-rate expectations, arguing that a stronger US labor market can increase the odds the Federal Reserve tightens further, which typically supports the US dollar and weighs on GBP/USD. It cited Bank of England Bank Rate at 3.75% and the Fed’s target range of 3.50% to 3.75%, with the effective Fed rate at 3.63%.
Looking ahead, FXStreet said markets are pricing 71.9 basis points of BoE tightening over the next 12 months versus 59.5 basis points for the Fed, with terminal rate expectations rising to 4.47% in London versus 4.22% in Washington by mid-2027. It added that the UK’s June CPI was 2.6% and that UK CPI is expected to rise as energy costs pass through, while US annual inflation is seen at 3.4% for Friday. It also pointed to the start of Monetary Policy Report hearings at 13:15 GMT on Tuesday, where multiple Bank of England officials, including MPC members, will discuss the July decision to hold Bank Rate and the growing hawkish minority.
Latest closeGBP/USD 1.348 ▼0.2%