GBP/USD Stuck in Range as Policy Rate Differential Vanishes

The GBP/USD currency pair has been trading in a range-bound pattern between 1.3150 and 1.36 for six weeks, despite the absence of a policy rate differential.

The UK's Bank Rate stands at 3.75%, while the Federal Reserve's target range is 3.50% to 3.75%, resulting in a negligible 12.5-basis-point advantage for sterling.

This lack of yield differential has shifted the focus from rate trade to sentiment and flow instruments, contributing to the pair's consolidation.