Markets price a 38% chance of a July Fed rate increase, bolstering USD and pressuring GBP/USD near 1.3290.
GBP/USD retreated to 1.3290 in Asian trading Tuesday, paring earlier gains as the US Dollar steadied ahead of the Federal Reserve’s policy decision. Uncertainty over a potential July rate hike, with markets pricing a 38% probability, supported the Greenback’s resilience.
Prior to the meeting, the CME FedWatch Tool showed an 81.4% chance of at least a 25-basis-point hike in September. Analysts cite Fed Chair Jerome Powell’s inflation-fighting commitments as a key driver for potential tightening. Meanwhile, falling oil prices eased broader inflation concerns, further stabilizing USD.
The British Pound faced additional pressure as 10-year gilt yields slipped to 4.97%, reflecting subdued investor sentiment. Diplomatic developments in the Middle East had limited impact on currency markets, though oil’s decline provided modest relief for monetary policy expectations.