GBP Retreats as USD Gains Traction Following Fed Decision

The British Pound (GBP) is experiencing a pullback from its weekly high against the US Dollar (USD), as the Greenback gains traction in the wake of the Federal Reserve's interest rate decision. The GBP/USD pair currently trades around mid-1.3300s, down over 0.10% for the day, and has stalled its recovery move from a nearly four-week low.

The US Dollar regained some positive momentum after slipping to an over one-week low following the Fed's decision on Wednesday. The central bank kept interest rates steady at 3.75%, but the vote was not unanimous, with three dissents in a 9-3 vote.

Traders are still pricing in a greater chance of at least one interest rate hike by the end of this year amid rapidly shifting inflationary dynamics due to volatile oil prices and escalating tensions in the Middle East. This is weighing on the GBP/USD pair, but traders may refrain from placing aggressive bets ahead of the crucial Bank of England (BoE) policy decision later today.

The BoE's interest rate decision will be closely watched, as a hawkish view could boost the Pound Sterling, while a dovish view would likely have a bearish impact. Additionally, important US macro releases, the Advance Q2 GDP report and the Personal Consumption Expenditures (PCE) Price Index, are expected later today.