Recent Federal Reserve tightening to a 3.75–4.00% target range, following its September 2026 hike, has reversed the prior yield advantage for sterling, with markets pricing additional U.S. rate increases while the Bank of England held at 3.75% on a 6–3 vote amid divided signals for November action. This policy divergence, alongside elevated UK CPI at 3.1% and energy-driven inflation risks projected above 4% into 2027, has pressured GBP/USD toward 1.32 levels near multi-month lows as the dollar index climbed above 101. Key near-term catalysts include the October 28 FOMC decision, November 5 BoE meeting with updated projections, and U.S. payrolls data that could shift rate expectations and amplify volatility in the pair through year-end.