GBP Plunges Against USD Amid Fed-BoE Policy Divergence

The British Pound (GBP) is struggling to recover from its losses against the US Dollar (USD), with spot prices hovering around the 1.3375 region, down nearly 0.15% for the day.

This weakness in the GBP can be attributed to the divergent policy outlook between the Federal Reserve (Fed) and the Bank of England (BoE). While the Fed is expected to raise interest rates further, the BoE has maintained a dovish stance by keeping rates unchanged at 3.75%.

This divergence in monetary policies has favored USD bulls, with the safe-haven currency regaining positive traction amid geopolitical uncertainties and the escalating tensions in the Middle East.

Analysts at Danske Bank noted that the BoE's decision to keep rates unchanged 'triggered some GBP weakness and lower rates', while Yemen's Iran-backed Houthi forces attacked sensitive sites in Saudi Arabia on Saturday, keeping the geopolitical risk premium in play.