GBP/USD reached its highest level in the past year at around 1.2660 at the end of Monday's European session.

The US dollar has continued its decline since last week. EUR/USD consolidated within the range of 1.1000-1.1100, while GBP/USD reached a one-year high around the 1.2660 level at the end of Monday's European session (May 8th). The next significant move will likely be influenced by the upcoming meetings of major central banks this week.

eurusdDaily EUR/USD chart via TradingView

Last week, the Federal Reserve in the US raised interest rates by 25 basis points but added a slightly more dovish tone in its announcement. As a result, market participants became increasingly pessimistic about the prospects for Fed interest rates.

The release of the US Non-farm Payroll data on Friday showed a very strong job market in the US. However, the data only briefly lifted the US dollar amid uncertainty about interest rates and turbulence in the American banking sector.

The FedWatch CME now shows market participants estimating a 1 in 3 chance of a scenario in which the Fed begins to cut rates in July. As a result, the US dollar continues to weaken against other currencies whose central banks are expected to have even higher interest rates this year, including the pound sterling and the Australian dollar.

The pound sterling is the main focus this week in connection with the Bank of England (BoE) regular meeting schedule on Thursday. The consensus expects the BoE to raise rates from the current 4.25% to 4.50% in that opportunity while also opening up opportunities for further increases. The hawkish expectations have driven the rise in GBP/USD and opened up a significant bearish risk if they fail to materialize.

"UK activity data has surprised to the upside in recent weeks and our economists now expect the Bank rate to peak at 5%," Sharon Bell, senior analyst at Goldman Sachs, said in a research briefing on Friday.

The euro also strengthened against the US dollar, but its performance was slower than the pound sterling. On the one hand, EUR/USD faces solid technical resistance at 1.1100. On the other hand, the Single Currency still lacks fundamental solid drivers. The outcome of last week's European Central Bank (ECB) meeting signaled an intention to slow down the pace of interest rate hikes. However, Christine Lagarde recently reiterated the commitment to maintain a tight monetary policy.