Pound Sterling Hits Seven-Week Low as Fed Hike Widens Policy Gap

The pound sterling saw significant fluctuations against the US dollar this week, ending at its lowest level in seven weeks. The GBP/USD pair traded at 1.3371 on Friday, down 0.22% from Thursday's close of 1.3351.

The divergence between the Federal Reserve and the Bank of England's monetary policies triggered a sharp decline in the pound. On Wednesday, the Fed raised its target range to 3.75%-4.00%, signaling further tightening, while the BoE held its Bank Rate at 3.75% in a 6-3 vote on Thursday.

The BoE's decision was seen as hawkish, with three members voting for a hike to 4%. The committee warned of rising inflation and volatility in energy prices, citing a protracted conflict in the Middle East.

UK retail sales volumes rose 0.5% in August, beating expectations, which helped stabilize the pound slightly on Friday. However, until the Fed signals a pause or the BoE hikes, cable is likely to drift lower, with 1.3300 as the next test.