Cable looks modestly biased higher after a less-hawkish Fed hold trumped a less-dovish BoE hold, leaving the near-term risk skewed toward sterling maintaining its recent gains.

Both central banks left rates unchanged, but the market reaction has been all about narrative rather than the decision. The post-Fed presser underwhelmed, with Chair Kevin Warsh's inflation-fighting credentials called into question after a non-committal answer on whether hikes remain a tool to arrest above-target inflation. The reaction was telling: long-end UST yields twist-steepened dramatically, and the jump in funding costs initially pressured equities dramatically lower, underscoring elevated near-term uncertainty.

Crucially, Fed near-term pricing has ratcheted lower. LSEG IRPR odds of a September hike have collapsed from 100% to 56%, while the December 2025 outlook has eased from +43bp to +31bp — a more dovish implied path.

The BoE's 7-3 hold, with three dissenters seeking a 25bp hike, reads hawkish on the surface. But the MPC has been loud and clear regarding its reliance on upcoming economic data, particularly regarding oil price volatility and its impact on inflation, before considering any policy adjustments.

With Fed hike expectations fading, GBP/USD should hold the bulk of recent gains,

A support level appears to be forming around 1.3275, the Monday-to-Wednesday low area. Traders will now be keenly awaiting upcoming U.S. payroll data, along with both U.S. and UK inflation figures, for further insights into the future direction of monetary policy in both economies.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)