Sterling is outperforming other major currencies in Thursday's trading, supported by a more hawkish-than-expected BoE rate hold, despite weakening slightly after the Fed's hold on Wednesday, and still poised for further gains beyond its nearby 2025 high. The dollar's uptick appears driven by haven buying after the overnight equity and risk selloff with long-end Treasury yields dropping, despite the Fed's repeated no-rush-to-cut stance. Fed Chair Jerome Powell's comments on high economic uncertainty further support haven demand for Treasuries and by extension the dollar. So, given inflation and rate uncertainty amid steady Fed and BoE rate expectations, the one constant remains uncertainty as both central banks have noted they expect rates to remain steady. Thursday's BoE rate hold came with a surprise vote of 8-1 to hold versus a forecast of 7-2, and the BoE warned against assumptions that rates would be cut over the meetings. With Fed and BoE rhetoric touting similar policy expectations, markets must wait to see who moves first. Currently, LSEG's IRPR predicts three Fed cuts in 2025 versus two from the BoE. If these expectations hold, GBP/USD is likely to continue its upward trend, with resistance near 1.30 potentially giving way to October highs above 1.31 and September peaks above 1.34.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)