GBP/USD Volatility Peaks as Fed Hikes Rates and BoE Holds

The GBP/USD exchange rate experienced significant volatility on Thursday following interest rate decisions from the US and UK central banks. The US Federal Reserve raised interest rates for the first time since 2023, taking the Fed funds rate to 4%, while the Bank of England left its interest rates unchanged.

Although the move was widely anticipated, the unanimous vote from policymakers boosted the US Dollar. However, this boost was short-lived as the Pound recovered some ground from its multi-week lows.

The BoE's decision to hold interest rates was seen as slightly dovish, but it also flagged concerns over inflation risks linked to the ongoing war in Iran, which helped cushion the Pound's decline.