Sterling Weakens vs Firm USD Ahead of Impending BoE Meet

Key Moments

BoE Meeting Looms as Sterling Drifts Near Late-July Lows

The British Pound remains pinned near recent lows against the U.S. Dollar, with GBP/USD locked in a bearish consolidation during the Asian session on Thursday. The pair is currently fluctuating around the 1.3380-1.3375 band, close to levels last seen on July 30, as investors step back from making major moves ahead of the upcoming Bank of England (BoE) policy announcement.

With the September meeting in focus, expectations are centered on the BoE keeping interest rates unchanged. As a result, market attention is shifting toward the central bank’s guidance, particularly in the context of elevated energy prices linked to the ongoing Middle East conflict. Pricing in money markets currently implies an 80% probability of a rate increase in November, seen as the first in a sequence of roughly four hikes over the next year. The tone of the BoE’s outlook is therefore likely to be a critical driver for the British Pound and could set the next directional move for GBP/USD.

Analysts See a “Hawkish Hold” with November Hike Signaled

Analysts at MUFG/BTMU anticipate that the BoE will deliver what they term a “fairly hawkish hold” at tomorrow’s meeting, using the opportunity to “provide a signal that a rate hike in November is on the cards if energy pricing remains elevated.” They have “pencilled in a 6-3 vote again,” while highlighting that “a 5-4 split would be no surprise, with Lombardelli being the most likely to join the dissenters.” In their assessment, “for now, a majority on the MPC is likely to believe that a ‘wait-and-see’ approach is still tenable,” even as policymakers keep open the possibility of additional tightening later in the year.

Fed Hawkishness and Geopolitical Risks Bolster the Dollar

Ahead of the BoE decision, the U.S. Dollar is consolidating near its strongest levels since late July, lending some support to GBP/USD but simultaneously restricting any substantial rebound. The U.S. Federal Reserve’s latest stance, combined with persistent Middle East concerns, is underpinning demand for the greenback and is likely to cap rallies in the pair.

The Fed raised its policy rate by 25 basis points on Wednesday, in line with expectations, and indicated that another increase could follow before the end of the year. At the same time, the ongoing U.S.-Iran standoff is maintaining a geopolitical risk premium, further supporting the safe-haven U.S. Dollar. Taken together, these factors suggest that the prevailing bias for GBP/USD remains tilted to the downside, with any corrective gains vulnerable to renewed selling.

From a technical perspective, the recent drop below the key 200-day Simple Moving Average (SMA) adds weight to the negative outlook and argues for caution among bullish participants. The technical break is reinforcing the view that the pair’s recovery attempts may be short-lived in the current environment.

Technical Picture: Bias Remains Negative Below 200-Day SMA

The near-term technical setup for GBP/USD continues to favor sellers while the pair holds below the 200-day SMA, located at 1.3454. In addition, spot prices have moved back beneath the important 38.2% Fibonacci retracement region, pointing to the likelihood that any rebounds may be contained below the 50% Fibonacci level and the nearby confluence with the 100-day SMA.

On the downside, immediate support is seen at the 61.8% Fibonacci retracement at 1.3346. Below that, a more substantial floor appears at the 78.6% retracement near 1.3256, followed by the prior cycle low region around 1.3141. The structure implies that further weakness remains possible if these supports come under sustained pressure.