Pound-Dollar could remain under pressure if the Federal Reserve reinforces expectations for higher US interest rates, while Sterling awaits Thursday’s Bank of England decision.
The Pound to US Dollar (GBP/USD) exchange rate held near a three-week low on Tuesday as another selloff in global technology stocks underpinned demand for the safe-haven US Dollar.
At the time of writing, GBP/USD was trading around $1.3295, little changed from Tuesday’s opening levels.
DAILY RECAP:
The US Dollar (USD) consolidated Monday’s gains as another wave of selling in global technology stocks encouraged investors to seek the safety of traditional haven assets.
The latest bout of market turbulence was driven by renewed weakness in semiconductor and AI-related shares, with investors growing increasingly concerned about the substantial debt many technology companies have accumulated to finance AI data centre expansion.
The pressure was compounded by intensifying competition from Chinese chipmakers, which appear to be closing the gap with their Western rivals.
However, further gains for the US Dollar proved limited as the continued de-escalation of tensions in the Middle East curbed demand for safe-haven assets.
Meanwhile, the Pound (GBP) traded in a relatively narrow range against most major currencies as investors awaited the Bank of England’s latest interest rate decision.
With no major UK economic data releases to provide direction, Sterling traders were reluctant to take significant positions ahead of Thursday’s policy announcement.
Markets overwhelmingly expect the Bank of England to leave interest rates unchanged at 3.75%, leaving the focus firmly on policymakers’ guidance.
If officials stop short of signalling that further interest rate increases remain possible later this year, the Pound could struggle to attract fresh buying interest.
Near-Term GBP/USD Forecast: Hawkish Fed to Strengthen the ‘Greenback’?
Looking ahead, Wednesday’s Federal Reserve interest rate decision is expected to be the key driver of the Pound to US Dollar exchange rate.
While policymakers are widely expected to leave interest rates unchanged, markets will closely scrutinise the accompanying statement for any hawkish signals that reinforce expectations for a September rate hike.
Meanwhile, Sterling is likely to remain rangebound ahead of the Bank of England’s own policy announcement on Thursday.
Our currency coverage draws on live market data, official economic releases and published bank research.
