GBPUSD has been extremely volatile since the beginning of June. The outlook for the second half of 2026 is tied to the “rate race” between the US Federal Reserve (Fed) and the Bank of England (BoE). The market had hoped for monetary easing, but reality dictates its own rules. Borrowing costs are likely to remain elevated, shaping the pair’s unique trajectory. Let’s take a closer look at the paths of the two central banks.
Fed’s hawkish renaissance
Under the leadership of the new Chairman, Kevin Worsh, the American regulator has made a pivotal shift: no easing cycles, only tight policy amid accelerating inflation. US borrowing costs have remained unchanged in the 3.50%–3.75% range. Moreover, a rate hike of 25–50 basis points by year-end is now under discussion. Such a hawkish posture is driven by a resilient US labor market and a persistent Consumer Price Index (CPI) that continues to run above the target.
What does this mean for GBPUSD? The dollar is set to receive a powerful boost as a higher-yielding currency, robbing the pound of any chance to rally above 1.35 in the coming months.
BoE’s forced pause
The British regulator finds itself in a predicament. Officials have kept interest rates at 3.75%—which is technically higher than in the US. The problem lies in sluggish GDP growth. The UK economy is now showing signs of stagnation while recording the sharpest inflation among G7 nations. The baseline scenario suggests that borrowing costs will stay the same. The market is currently pricing in a 30% probability of a rate hike by the end of 2026.
If the BoE remains passive, the monetary gap will tilt further in favor of the dollar, and the pair could approach the lower boundary of the channel.
In the medium term, the Fed’s aggressive policy is likely to be the primary driver of GBPUSD’s dynamics. Over the summer, the pound is expected to test the 1.31–1.32 support zone. The pair may rise to the 1.38–1.39 range only in the fourth quarter of 2026 if the US economy cools and the Fed adopts a less hawkish stance. Until then, any bounce in sterling will be seen by the market as an opportunity for short-term positioning to the downside.
The overall recommendation is to sell GBPUSD. Profits should be taken at 1.3200. Stop Loss could be set at 1.3540.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
