• Fed dots show nine policymakers eyeing hikes in 2026.
• BoE holds rates, but Pill and Greene back tightening.
• UK political risk grows as Burnham challenges Starmer’s leadership.

The Pound Sterling drops on Thursday during the North American session as traders continued to digest the Fed’s hawkish tilt, even though the Bank of England (BoE) held rates unchanged in a 7-2 vote. The GBP/USD trades at 1.3234, down 0.39%.

GBP/USD falls as hawkish Fed repricing overwhelms BoE hold

Market mood turned positive as investors kept US equities rising, boosted by AI hype and Apple’s collaboration with Intel. This is despite the hawkish shift by nearly half of the Federal Open Market Committee (FOMC) members, which decided to hold rates steady, while updating their economic projections.

The FOMC is composed of 19 members, and 9 of them see at least one rate hike in 2026, while 7 expect the Fed to sit tight, and 1 expects a rate cut. Worth noting is that Fed Chair Kevin Warsh skipped the dot plot, saying he doesn’t like forward guidance.

Consequently, markets began to price in a hawkish Federal Reserve. As of writing, 36 basis points of tightening are expected towards the end of 2026.

The median amongst the US central bank policymakers expects inflation to end at 3.6% in 2026 and expects to reach the Fed’s 2% goal in 2028. The economy is expected to grow below the previous estimate of 2.6%; they now see GDP at 2.2% by year-end and the Unemployment Rate holding steady.

On the data front, Initial Jobless Claims in the US dropped from 230K to 226K, a touch above estimates of 225K yet showed an improvement in the labor market.

The GBP/USD continues to tread water as the decoupling of the positive correlation between the US Dollar and Oil prices is underway. WTI tumbles 2.20% to $73.27 per barrel, while the Greenback posts gains of 0.26% as shown by the US Dollar Index (DXY).

The DXY, which tracks the buck’s value against six currencies, trades at 100.63, slightly below its year-to-date (YTD) peak of 100.81.

Across the pond, the BoE held rates at 3.75% on a 7 to 2 vote split, with Chief Economist Huw Pill and Megan Greene voting for a hike, citing households’ inflation expectations at their highest level since 2009, according to a BoE quarterly survey.

Earlier, UK jobs data were solid, with the economy adding 100K people to its workforce, yet UK wage growth, excluding bonuses, exceeded estimates at 3.3% and rose to 3.4% in the 3 months to April.

Despite this, Sterling’s path is shaped by more than economics. Elections in the UK began on Thursday, and the victory of Labor Manchester Mayor Andy Burnham would return him to Parliament and challenge embattled Prime Minister Sir Keir Starmer.

When rumors surfaced that Burnham could enter the race to become PM, UK Gilts jumped amid speculation that he is a leftist, and a victory could increase spending in the UK.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3236, extending a bearish bias as price holds well below the simple moving average cluster now aligned near 1.3469 and beneath the confluence of a former upward trend-line and the prevailing downward resistance line clustered around the mid‑1.34s. The Relative Strength Index (14) has slipped toward 33, hinting at building downside momentum as the pair drifts toward oversold territory without yet signalling a confirmed exhaustion of the sell-off.

On the topside, initial resistance is seen near the downward resistance trend line around 1.3414, with the now-broken upward trend-line turning into additional supply just above 1.3417, while the simple moving average cluster near 1.3469 forms a higher cap that would need to be reclaimed to ease downside pressure. With no clear structural floors defined below the market in the provided data, the pair remains vulnerable to further declines until new demand emerges and price can stabilize back above the mid‑1.34 region.

(The technical analysis of this story was written with the help of an AI tool.)