Pound Sterling flat lines vs USD as traders await BoE policy update and US PCE Price Index

• GBP/USD bulls seem hesitant as the Fed’s hawkish tilt and the US-Iran tensions underpin the USD.
• Bets for two BoE rate hikes in 2026 offer support to the GBP and act as a tailwind for spot prices.
• Traders also seem reluctant ahead of the BoE decision and the crucial US PCE Price Index data.

The GBP/USD pair struggles to capitalize on a modest Asian session uptick to the 1.3500 neighborhood, though it holds above the 100-day Simple Moving Average (SMA). Spot prices currently trade around the 1.3475-1.3480 region, nearly unchanged for the day, as traders look forward to the Bank of England (BoE) event and the US inflation data for a fresh impetus.

The UK central bank is scheduled to announce its policy decision later today and is expected to keep interest rates on hold. The current market pricing, however, points to a greater possibility of two rate hikes in 2026 amid inflation risks stemming from the war-driven surge in energy prices. Hence, the focus will be on the accompanying policy statement and the post-meeting press conference, where comments from BoE Governor Andrew Bailey will be scrutinized for cues about the interest rate path. The outlook, in turn, will play a key role in influencing the British Pound (GBP).

Traders will further take cues from the US Personal Consumption Expenditures (PCE) Price Index, which should further provide some meaningful impetus to the GBP/USD pair later today. In the meantime, the US Federal Reserve's (Fed) hawkish tilt, along with the US-Iran stalemate, might continue to act as a tailwind for the US Dollar (USD) and cap the upside for the currency pair. The Fed's decision to keep interest rates unchanged on Wednesday saw the highest number of dissents since 1992, with three policymakers voting against the accommodative tone in the policy statement.

Traders were quick to reduce bets on any further easing by the Fed in 2026; instead, they are now pricing in over a 10% chance of a rate increase by the year-end. On the geopolitical front, US President Donald Trump rejected Iran's new proposal to end the two-month conflict and reiterated that there will be no peace deal with the Islamic Republic unless it agrees to give up the nuclear program. Trump further added that the naval blockade of Iranian ports will continue, which keeps geopolitical risks in play. This, in turn, favors the USD bulls and should keep a lid on the GBP/USD pair.