GBP Weakens as US Interest Rates Rise, Widening Divergence Between Fed and BoE
The British Pound has weakened against the US Dollar as interest rates in the United States rise. The GBP/USD pair tested five-week lows of 1.3464 and trimmed some of its losses, but remains down 0.23% due to a widening interest rate differential between the Federal Reserve (Fed) and the Bank of England (BoE).
US inflation figures from last week pushed US 10-year T-note yields past the 5% threshold for the first time since 2023, increasing bets that the Fed will raise rates on Wednesday. The Prime Terminal sees a 93% chance of a hike, with only a 7% chance of holding rates unchanged.
The widening interest rate differential puts the US Dollar in the front seat, paving the way for further downside in GBP/USD. The UK's economic docket features jobs data on Tuesday, while the ADP Employment Change 4-week average is expected in the US ahead of Wednesday's FOMC policy decision.