GBP/USD Rebounds as US Dollar Strengthens on Hawkish Fed Signals
The GBP/USD currency pair has experienced a modest rebound after falling to a one-week low last Friday. Prior to this, it had been in a sustained correction from its February high. The US dollar's strengthening, partly due to hawkish signals from Federal Reserve Governor Christopher Waller, has put pressure on the pound.
The market is currently expecting further policy tightening by the Fed in September, which could sustain the upward trend of the US dollar and weigh on GBP/USD. However, UK domestic fiscal policy remains a key factor supporting the pound, with Chancellor John Healey emphasizing the importance of maintaining fiscal discipline ahead of the Autumn Budget.
Despite this, market expectations for Bank of England rate hikes have not shifted towards a hawkish stance, pushing back expected hikes from late 2026 to 2027. This divergence in monetary policy expectations between the US and UK is preventing GBP/USD from forming a sustained upward trend.