GBP/USD near 1.3400, holds losses before BoE policy decision

• GBP/USD Faces Downward Pressure Amid Global Geopolitical Tensions
• Federal Reserve Maintains Interest Rates, Affecting USD Value
• US Dollar Strengthens as Fed Chair Powell Highlights Inflation Concerns

The GBP/USD pair has experienced a decline for three consecutive trading sessions, currently positioned around 1.3410 during Asian trading hours on Thursday. The US Dollar is strengthening as investors seek safer assets, fueled by the increasing tensions between Israel and Iran. Additionally, expectations are set for the Bank of England (BoE) to maintain its current interest rates in their upcoming decision.

Consumer Price Index (CPI) inflation in the UK has slightly decreased to 3.4% year-over-year in May, aligning with forecasts and down from April’s 3.5%. Despite this, inflation remains above the BoE’s target of 2%, and the market anticipates approximately 48 basis points in rate reductions by year’s end.

Recent reports from Bloomberg and the Wall Street Journal indicate escalating US military readiness for potential conflicts with Iran. These developments are in response to ongoing concerns regarding Iran’s nuclear ambitions and its geopolitical implications.

The US Dollar also found support following remarks from Fed Chair Jerome Powell, who suggested that inflation might continue to rise, influenced partly by tariffs imposed by former US President Donald Trump. Powell endorsed the Fed’s current policy stance, suggesting it positions them appropriately amid ongoing economic uncertainties, with future rate adjustments heavily reliant on labor and inflation data.

The US Federal Reserve has decided to keep its policy rate steady at 4.25%–4.50% during its June meeting, as anticipated. The Federal Open Market Committee (FOMC) continues to forecast about 50 basis points of rate cuts extending through the end of 2025.