GBP/USD slid away from its early NorAm session high of 1.3471 on Monday after non-voting Fed member James Bullard said the U.S. central bank may have to hike 50bp more this year, which could keep a lid on GBP/USD if other policymakers echo the sentiment.

With little momentum on the other key driver of recent volatility, the debt ceiling, Bullard's comments weighed heavily on GBP/USD as markets reprice Fed rate expectations for 2023.

Earlier in May IRPR on Eikon had projected a halt to Fed hiking and as much as 85bp of rate cuts by December meeting.
Markets have since reduced those dovish expectations, with futures markets now pricing 38bp of rate cuts by December and near 50% odds for a 25bp hike by July.

Meanwhile, UK rate expectations have remained relatively steady, with the BoE expected to hike 50 more basis points by September and cuts not foreseen until Q4 2024.

Bullard's comments were hardly a new development, so their effect may be transitory, but the less-dovish year-end rate cut expectations and high rather than higher-for-longer Fed expectations are likely to anchor GBP/USD near current levels.

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