GBP/USD Forecast: Sterling Faces Fiscal Concerns Ahead of BoE Meeting

Rabobank Senior FX Strategist Jane Foley expects GBP/USD to trade around 1.32-1.33 over the next one to three months, as hawkish BoE rhetoric may support Sterling initially but steady interest rates and UK fiscal concerns could weigh on the currency further out.

The recent Federal Reserve decision saw 30-year bond yields jump, while short-term rates dropped and the USD weakened, reflecting doubts about Chair Warsh's inflation-fighting credentials.

Despite expectations of a steady policy outcome from the Bank of England meeting, BoE watchers like Stefan Koopman at RaboResearch believe the Bank may keep policy steady this year. However, the market is likely to take the BoE's hawkish rhetoric at face value and maintain its expectations of rate hikes.