Sterling rose slightly on Friday as banking contagion fears ebbed after rescues of Credit Suisse and First Republic calmed FX and sovereign debt markets long enough to lift expectations for a 25bp rate hike at the upcoming BoE meeting, underpinning GBP/USD near trend highs though further gains may be difficult.

Sentiment remains fragile, with equity markets trading lower and investors wondering what will be the next source of turmoil, which could cap gains in risk-sensitive sterling near recent highs just above 1.22.

Traders are focused on next Wednesday's Fed policy decision and the BoE rate verdict on Thursday, well as any comments they make about banking troubles, which severely curtailed tightening expectations.

Investors appear to suspect that 50bp hikes are off the table, so too is the prospect of no moves.

IRPR on Eikon is pricing 25bp hikes from the Fed and BoE, which should keep GBP/USD steady, unless the comments afterward are particularly dovish.

After the ECB's 50bp hike, central banks appear to remain in inflation-fighting mode, though it will be interesting to see how policymakers reconcile large bailouts -- essentially easing -- with efforts to subdue price growth.

For more click on FXBUZ