GBP/USD Forecast: Pound Sterling Touches Eight-Day Low amid Monetary Policy Expectations

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Touches Eight-Day Low amid Monetary Policy Expectations

The Pound US Dollar (GBP/USD) exchange rate edged lower on Thursday as changing expectations for central bank interest rates kept the pairing under pressure.

At the time of writing, GBP/USD was trading at $1.3581, having recovered slightly from an eight-day low of $1.3572 but remaining down on the day.

The US Dollar (USD) continued to trade on solid footing on Thursday, after Wednesday’s inflation figures prompted markets to revise their expectations for the Federal Reserve’s next interest rate move.

The latest core PCE price index – the Fed’s preferred inflation measure – suggested that price pressures remain stubbornly above target. This reinforced expectations that the US central bank could raise interest rates in the coming months.

This helped to keep USD supported into Thursday’s session.

Meanwhile, the Pound (GBP) came under some pressure as markets pushed back their expectations for a Bank of England (BoE) interest rate hike from late 2026 to 2027.

The recent fall in global oil prices has reduced expectations that the BoE will raise interest rates this year, leaving Sterling on the back foot.

Concerns surrounding the UK’s rising cost of living also dampened the appeal of the Pound, following news on Wednesday that the energy price cap will rise by 4% in October and could increase further in January.

Near-Term GBP/USD Forecast: Fed Expectations in Focus

Looking ahead, Federal Reserve interest rate expectations could remain a key focus on Friday, with Fed Chair Kevin Warsh due to deliver a keynote speech at the bank’s Jackson Hole symposium. The US will also publish its annual revision to the non-farm payroll figures.

A weak set of jobs figures, combined with a cautious message from Warsh, may dampen expectations for further Fed rate hikes and put the US Dollar under pressure. However, stronger payrolls data and a hawkish tone from the Fed chair could fuel a USD rally.

For the Pound, the UK’s economic calendar remains light on Friday. As a result, Sterling may struggle to gain momentum once again.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts