Pound Nears 1.3600 as BoE Hike Bets Lose Momentum

Key Moments

BoE Expectations Repriced as Oil and Inflation Concerns Ease

GBP/USD edges higher in early Asian trading on Friday, hovering near 1.3600 after two sessions of declines. The move comes as the British Pound faces a more challenging macro backdrop, with recent weakness in Brent crude oil prices reducing immediate inflation pressures and prompting traders to reassess the timing of the next Bank of England policy move.

Money markets have shifted their view on the BoE’s tightening path, pushing back the anticipated next rate increase from late 2026 into early 2027. LSEG pricing data shows that markets currently discount just 24 basis points of additional tightening by December and 36 basis points by February 2027. Ahead of the BoE’s September policy decision, less than 4 basis points of hikes are priced, implying roughly a 15% chance of a move.

Earlier, expectations for tighter policy had been supported by concerns that an escalation in US-Iran tensions could fuel inflation. However, most economists still expect the BoE to keep its benchmark rate unchanged at 3.75% through year-end. That view is underpinned by a mixed domestic backdrop: UK inflation accelerated to 2.9% in July, driven largely by higher household energy bills and is projected to rise further toward year-end, while labor market indicators continue to point to underlying softness.

Muted UK Data Flow Keeps Pound Under Pressure

Strategists at Scotiabank highlight that the near-term UK data schedule offers limited catalysts for the currency. They note that “the domestic calendar has been limited” and “the absence of any major releases ahead of next week’s final PMI’s” has kept many market participants sidelined.

They also observe that “messaging from the BoE has been equally limited,” and emphasize “the modest softening of tightening expectations observed over the past week or so,” which has further weighed on sentiment toward the Pound.

Focus Shifts to Jackson Hole and Fed Policy Signals

With the domestic backdrop relatively quiet, forex markets are turning their attention to the annual economic symposium in Jackson Hole, Wyoming. Traders are closely watching an upcoming speech by Federal Reserve Chairman Kevin Warsh for any indications on the future direction of US monetary policy and interest rates.

Scotiabank Flags Complacency in Jackson Hole Volatility Pricing

Strategists at Scotiabank caution that historical precedent suggests Jackson Hole “can have a significant impact on market pricing,” yet options markets are signaling a relatively subdued risk outlook. They point out that “1w implied vols are running well below recent averages,” which they believe “suggests markets may be a little complacent about the Warsh’s speech and the potential impact on markets,” even as the US Dollar firms heading into the event.

GBP/USD Technical Picture: Bullish Structure Intact Above EMA Support

On the daily chart, GBP/USD is trading around 1.3600 and maintains a constructive bullish tone. The pair remains above both the nine-period and 50-period Exponential Moving Averages, which continue to underpin the recent advance.

The 14-period Relative Strength Index stands near 61, firmly in positive territory but not yet signaling overbought conditions. This configuration points to ongoing upward momentum and leaves scope for additional gains if buyers retain control.

On the downside, initial support is located at the nine-period EMA at 1.3593. A more substantial demand area is seen near the 50-period EMA around 1.3478 should a corrective move develop. As long as GBP/USD closes above these moving average levels, the broader bullish bias is expected to remain intact, with dips into the EMA region likely to be viewed as potential buying opportunities rather than signs of a trend reversal.