The Pound Sterling (GBP) edged higher, with GBP/USD trading around 1.3230 during Asian hours on Friday, following modest losses the previous day [1]. This movement comes as traders are pricing in two Bank of England (BoE) rate hikes in 2026, driven by rising energy prices and inflation concerns [1]. However, BoE Governor Andrew Bailey cautioned that these expectations may be overstated, suggesting that the market may be too optimistic about the scale of future rate increases [1].
Trading activity is expected to remain subdued due to the Good Friday holiday [1]. The upside for GBP/USD could be limited, as the US Dollar (USD) may strengthen amid increased safe-haven demand following recent threats from US President Donald Trump regarding Iran [1]. President Trump warned of intensified military action over the next two to three weeks and did not clarify steps toward reopening the Strait of Hormuz, while Iran’s Foreign Minister Abbas Araghchi responded that US strikes on civilian infrastructure would not force a retreat, instead characterizing them as evidence of an opponent in disarray and moral decline [1].
Chicago Fed President Austan Goolsbee also expressed concern about rising oil prices, noting that they could complicate efforts to curb inflation, especially if gasoline costs surge and lift inflation expectations [1]. These developments add to the inflationary pressures that are influencing market expectations for BoE policy.
The Pound Sterling is the official currency of the United Kingdom and is issued by the Bank of England. Its value is heavily influenced by BoE monetary policy, particularly interest rate decisions aimed at maintaining price stability [1].
CONCLUSION
Markets are currently pricing in two BoE rate hikes in 2026 amid inflation and energy price concerns, supporting the Pound Sterling. However, caution from BoE Governor Bailey and global geopolitical tensions may limit further gains. The market impact is medium, with sentiment slightly positive but tempered by uncertainty.