Pound Softens as Surging US Yields Counter BoE Rhetoric

Key Moments

Dollar Strength Weighs on GBP/USD

GBP/USD softens toward 1.3250 during early Asian trading on Tuesday, with the British Pound losing ground against a stronger U.S. Dollar. U.S. Treasury yields holding above 5% at multi-decade highs are providing a firm underpinning for the Greenback and limiting upside for the pair. Market participants are also focused on upcoming comments from Federal Reserve officials later on Tuesday.

Concerns over energy supply, combined with solid U.S. economic data, have intensified worries about inflation and encouraged traders to increase expectations for additional Federal Reserve rate hikes. The move higher in longer-dated Treasury yields is adding further support to the U.S. Dollar and acting as a drag on GBP/USD.

“What’s happening is that you’ve got the US rejecting the Iranian offer and oil prices jumped, pushing upward pressure on US yields, and that is what’s lifting the dollar more broadly,” said Marc Chandler, chief market strategist at Bannockburn Forex.

BoE Hawks Offer Some Support for Sterling

On the UK side, more hawkish commentary from Bank of England officials has the potential to lend some near-term support to the Pound. BoE Deputy Governor Dave Ramsden stated on Monday that there may be justification for raising the Bank Rate if the upward pressures on the inflation outlook continue to mount.

Ramsden is part of the 6-3 majority on the Monetary Policy Committee that opted to keep interest rates unchanged this month. In contrast to the U.S. central bank, the BoE has not raised rates since the start of the Iran war, reflecting a view that its current policy stance is already restrictive.

HSBC Sees Near-Term Pressure on the Pound

Strategists at HSBC caution that the Pound is likely to stay under pressure in the near term. They emphasize that “weak UK labour demand and sluggish private sector momentum could weigh on the GBP in the near term, particularly as the US economy is looking more resilient.” According to their assessment, markets are “already pricing around 100bp of tightening from the Bank of England by July 2027,” but they highlight that “higher energy prices create a difficult policy mix: inflation risks are rising even as growth momentum faces a challenging outlook,” leaving the BoE to manage a more complicated backdrop for GBP/USD.

Ramsden Signals Upside Inflation Risks

BoE Deputy Governor Ramsden’s recent remarks have been assessed as notably hawkish. He scores 8.4/10 on FXS Speechtracker, materially above the historical baseline of 7.1/10, indicating an unusually strong perceived policy impact.

The focus of his comments on external inflation drivers such as energy, weather, and AI-related supply chains, together with domestic spillovers into food prices and possible second-round effects, underscores heightened concern about persistent price pressures.

By stating that risks to the inflation outlook have shifted to the upside and that ongoing upward pressures could justify a higher Bank Rate, Ramsden marks a clearly more hawkish stance compared with the average tone. This combination of a high speech impact score and explicit openness to additional tightening is seen as supportive for the Pound, particularly if upcoming data align with the theme of renewed inflation risks.

Technical Picture: GBP/USD Holds a Bearish Bias

From a technical standpoint, GBP/USD maintains a bearish short-term structure on the daily chart, with spot trapped below both the Bollinger Bands simple moving average and the 100-day simple moving average (SMA). The pair is trading closer to the lower portion of the recent Bollinger envelope, while the Relative Strength Index (RSI) at 30.0 sits just above oversold territory. This suggests that although downside pressure remains, the decline appears stretched rather than sharply accelerating.

The lower Bollinger band around 1.3175 is the next notable support. A decisive move beneath this area would confirm renewed weakness and expose the pair to further losses into the mid-1.31s.