Monetary policy divergence between the Federal Reserve and Bank of England remains the dominant driver of GBP/USD positioning near 1.32–1.325 in mid-October 2026. The Fed’s September hike to a 3.75–4.00% target range, reinforced by minutes showing broad support for another increase before year-end, has supported the dollar amid resilient U.S. growth and elevated Treasury yields. In contrast, the BoE held Bank Rate at 3.75% while markets price an 80–90% probability of a November hike, reflecting persistent UK inflation risks from higher energy prices tied to Middle East developments. Recent data add nuance: the IMF upgraded its 2026 UK GDP forecast to 1.3%, yet upcoming releases including U.S. CPI, UK GDP, and the October 28 Budget could shift rate expectations and volatility ahead of year-end resolution.