GBP/USD Stuck at Three-Month Lows Amid Fed Hike Expectations

The GBP/USD currency pair continues to trade at three-month lows, with no signs of relief in sight. Investors remain bearish on the pound due to growing expectations of a Federal Reserve rate hike as early as October, which is supported by high oil prices and stalled negotiations to resume full operations at the Strait of Hormuz.

The US dollar benefits from these developments, making it a safe-haven asset for investors. Meanwhile, markets estimate that there's over an 80% chance of a November Bank of England rate hike, which is priced in with approximately four increases by mid-2027. However, the UK's weak growth outlook may limit the central bank's ability to tighten aggressively.

Deputy Governor Dave Ramsden recently stated that he would support further rate hikes if inflationary pressures persist, aligning with recent warnings from Andrew Bailey. The Bank of England voted 6 to 3 to keep rates at 3.75%, warning that inflation could climb to around 4%.