GBP/USD stabilizes at 1.2160 amid Fed hawks and rising BoE cut expectations

GBP/USD is trading sideways around 1.2160, caught between opposing forces as hawkish Fed rhetoric supports the dollar while growing Bank of England rate cut expectations weigh on sterling. The Dollar Index has recovered to 105.20 from earlier lows, aided by Fed officials pushing back against aggressive easing expectations. UK 2-year gilt yields fell 8 basis points to 4.15% as markets price in a 70% chance of a BoE rate cut by February, up from 55% last week. US 2-year Treasury yields remain elevated at 4.35%, maintaining the interest rate differential in favor of the dollar. Technical analysis shows GBP/USD trapped in a narrow 1.2140-1.2180 range, with a break below potentially targeting 1.2100 support. The pair awaits fresh catalysts from upcoming UK inflation data and Fed meeting minutes, with downside risks mounting as BoE dovishness increasingly outweighs Fed easing expectations.