British Pound Holds Ground Amid BoE Warning on Global Financial Risks

British Pound movements slowed on Wednesday after a three-day decline, showing signs of stabilization despite ongoing pressure from global financial uncertainties. Traders reacted cautiously to the Bank of England’s (BoE) latest Financial Stability Report, which flagged growing risks in the global economic environment.

At the time of writing, the British Pound to US Dollar (GBP/USD) exchange rate hovered around 1.3587, slightly below the 1.3600 mark. Meanwhile, the US Dollar Index (DXY) held firm near 97.60, as investors awaited the release of the Federal Reserve’s FOMC Meeting Minutes later in the day for clues on future rate decisions.

British Pound Faces Pressure from Global Risk Factors

The Bank of England highlighted in its report that the UK’s financial system remains stable. However, it warned of increasing global risks such as persistent geopolitical tensions, fragile trade flows, and rising levels of government debt across key economies. These conditions, the BoE said, could lead to sudden corrections in asset prices and reduce financing options for UK households and businesses.

Despite these concerns, the central bank’s Financial Policy Committee (FPC) maintained its confidence in the resilience of UK banks. Lending activity, particularly in the mortgage sector, has remained strong, suggesting continued demand from households. The FPC kept the Countercyclical Capital Buffer (CCyB) at 2% but made clear it would adjust it if domestic conditions worsened.

The report also touched on risks tied to digital finance, especially stablecoins. The BoE emphasized that such assets should be backed by stable reserves and must maintain price stability to avoid financial disruption. It also reiterated previous concerns about vulnerabilities in the non-bank financial sector and called for greater transparency and regulation.

Eyes on the Fed and Trade Developments

As the British Pound steadies, market participants are closely watching the release of the Federal Open Market Committee (FOMC) minutes, scheduled for 18:00 GMT. Any signals regarding U.S. interest rates or inflation expectations could sway currency pairs, especially if the Fed signals a more aggressive or cautious stance.

Additionally, ongoing global trade concerns remain a key focus. Recent U.S. tariff threats and the extended deadlines for retaliatory measures have kept markets alert. Any shift in trade policy or rhetoric could further impact the British Pound and broader market sentiment.

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