The Federal Reserve raised rates to 3.75–4.00% while the Bank of England held its rate at 3.75%, opening a policy gap that is pressuring GBP/USD. The pair is now testing the 1.332–1.337 zone, an area that has previously drawn buyers within its year-long 1.315–1.375 range.
GBP/USD is testing the 1.332–1.337 support zone as the Federal Reserve turns more hawkish than the Bank of England. The divergence between the two central banks can remain an important driver of the pair's next move.
Fed hikes, Bank of England holds
The Federal Reserve raised its policy rate by 0.25 percentage points to 3.75–4.00%. Its median projection puts the federal funds rate at 4.1% by the end of 2026, suggesting the Fed is not ruling out further tightening if inflation persists. Higher US rates increase the appeal of dollar-denominated assets, which can support the dollar against the pound.
By contrast, the Bank of England kept its rate unchanged at 3.75%, continuing to weigh persistent inflation against the risk that restrictive policy slows economic activity. This interest rate divergence can therefore remain an important driver of GBP/USD.
Pound tests a zone that has held before
GBP/USD has traded inside a 1.315–1.375 range for more than a year and is now testing the 1.332–1.337 area, a support level where buyers have appeared before. If demand holds there, it could temporarily offset dollar strength; a decisive break below, however, would shift attention toward the lower part of the broader range.
Stocks recover as yields and oil ease
US equities initially fell after the Fed decision, but buyers returned as the 10-year Treasury yield moved back below 5% and oil prices kept declining. Lower oil prices can ease inflation pressure, while softer yields can ease financial conditions for stocks, helping explain the rebound.
The Fed has made clear that future policy decisions will remain dependent on incoming economic and inflation data, so GBP/USD's next move rests as much on that data as on whether the 1.332–1.337 zone holds.
Source: MQL5: Traders' Blogs
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