GBP/USD Plunges to Seven-Week Lows Amid Diverging Policy Expectations

The Pound to Dollar exchange rate (GBP/USD) has fallen to seven-week lows below 1.3350 due to diverging Federal Reserve and Bank of England policy expectations favoring the US currency.

The Fed raised interest rates to 4.00% and maintained a hawkish stance, while the BoE kept its rate at 3.75%, leaving Sterling vulnerable if markets further reduce expectations of UK tightening.

Danske Bank forecasts that GBP/USD will slide to 1.27 on a 12-month view amid a weaker Pound and strong dollar, while Scotiabank has a 12-month forecast of 1.39 with a constructive Pound outlook.

According to Credit Agricole, the Pound will continue to follow UK rates and could remain susceptible to any potential loss of relative rate appeal.