The pair gains modestly as the US Dollar Index dips 0.15% ahead of next week’s Federal Reserve meeting expected to hold rates steady.
The British Pound (GBP) trades slightly higher at 1.3387 against the US Dollar (USD) in European trading, supported by a 0.15% decline in the US Dollar Index (DXY) to near 101.00. Rising Middle East energy supply risks have not offset the Greenback’s weakness as markets await the Federal Reserve’s policy decision next week.
Investors expect the Fed to leave interest rates unchanged, while the Bank of England (BoE) is seen maintaining its current rate of 3.75% through 2026. UK inflation cooled to 2.6% YoY in June, easing pressure on the BoE to hike further. Economists forecast gradual rate cuts starting in 2027, totaling 75 basis points by early that year.
The GBP’s mixed performance reflects uncertainty over the BoE’s timeline for policy easing, though near-term tightening appears unlikely given cooling inflation data.