British Pound edges higher despite delaying BoE rate hike expectations

GBP/USD inches higher after two days of losses, trading around 1.3600 during the Asian hours on Friday. However, the British Pound (GBP) may encounter headwinds as recent declines in Brent crude oil prices ease immediate inflation concerns. This shift has led money markets to push back expectations for the Bank of England's (BoE) next interest rate hike from late 2026 into early 2027.

According to LSEG pricing data, financial markets reflect just 24 basis points of policy tightening by December and 36 basis points by February 2027. Ahead of the BoE's September meeting, less than 4 basis points are priced in, translating to roughly a 15% probability of a rate increase.

Despite earlier market speculation of a rate hike driven by fears over potential US-Iran conflict escalation, most economists maintain that interest rates will hold steady at 3.75% through the end of the year. Underpinning this outlook is a mixed economic backdrop: UK inflation accelerated to 2.9% in July, primarily fueled by rising household energy bills, and is projected to edge higher toward year-end, even as the labor market continues to display underlying weakness.

Pound tone softens as quiet UK calendar tempers BoE tightening bets

Strategists at Scotiabank point out that the UK data backdrop offers little to drive the Pound in the near term, with “the domestic calendar has been limited” and “the absence of any major releases ahead of next week’s final PMI’s” keeping traders on the sidelines. They add that “messaging from the BoE has been equally limited,” while highlighting “the modest softening of tightening expectations observed over the past week or so,” which has further weighed on sentiment toward GBP.

Meanwhile, forex traders are turning their focus to the annual economic symposium in Jackson Hole, Wyoming. Market participants are closely monitoring an upcoming speech by Federal Reserve Chairman Kevin Warsh, searching for potential signals regarding the direction of US monetary policy and interest rates.

Markets seen complacent on Jackson Hole risk despite Dollar bid

Strategists at Scotiabank caution that, while history shows Jackson Hole “can have a significant impact on market pricing,” current option markets are sending a different signal. They note that “1w implied vols are running well below recent averages,” which in their view “suggests markets may be a little complacent about the Warsh’s speech and the potential impact on markets,” even as the USD edges firmer into the event.

Technical Analysis:

In the daily chart, GBP/USD trades at 1.3600. The pair holds a constructive bullish bias as it trades above both the nine- and 50-period Exponential Moving Averages (EMAs), keeping the recent advance technically supported. The 14-period Relative Strength Index (RSI) around 61 sits in positive territory without being overbought, hinting that upside momentum remains in place while leaving room for further gains if buyers stay in control.

On the downside, immediate support is found at the near-price nine-period EMA at 1.3593, with a deeper layer of demand emerging at the 50-period EMA around 1.3478 if a corrective pullback unfolds. As long as GBP/USD holds above these moving-average supports on a closing basis, the broader bullish tone is likely to persist, with any dip toward the EMA cluster viewed as a potential buy-the-dip area rather than a trend reversal signal.