GBP/USD Forecast: Pound Sterling Falters After Fed, BoE and Borrowing Data

Modified: Friday, 19 September 2025 09:00 BST - Written by Tim Boyer

STORY LINK GBP/USD Forecast: Pound Sterling Falters After Fed, BoE and Borrowing Data

The Pound US Dollar exchange rate (GBP/USD) retreated on Friday as the Dollar held firm and fresh UK data highlighted fiscal concerns despite a UK Retail Sales beat.

At the time of writing, GBP/USD was trading at $1.3512, down –0.32% on the day.

The US Dollar (USD) gained momentum earlier after the Federal Reserve’s policy announcement midweek.

The Fed struck a less dovish tone than many had expected, with only Stephen Miran – the recently appointed ally of President Donald Trump – backing a deeper 50bps cut.

Fed Chair Jerome Powell added that inflation risks remain tilted to the upside, stressing that the impact of Trump’s tariffs could be temporary or potentially longer-lasting.

This curbed expectations of an aggressive rate-cutting cycle and initially bolstered the ‘Greenback’.

That said, the Dollar’s rally faded quickly, allowing GBP/USD to recover some losses before Sterling came under pressure from domestic data.

The Pound (GBP) saw a choppy performance through Thursday’s European session in the run-up to the BoE decision.

As widely predicted, the central bank kept interest rates on hold, but sentiment weakened after two policymakers backed a rate cut and the BoE opted to slow the pace of quantitative tightening.

Friday’s UK releases then provided a mixed picture. Retail sales volumes rose 0.5% month-on-month in August, slightly firmer than expected once revisions to July were factored in.

However, this was overshadowed by public finance data showing government borrowing of £18bn – some £5.5bn larger than forecast – raising concerns about the fiscal outlook ahead of the autumn budget.

Economists at Lloyds noted that the overshoot in borrowing, alongside unfavourable revisions to prior months, leaves the deficit tracking well above expectations, presenting a “gloomy” backdrop for fiscal policy.

GBP/USD Forecasts: Market Sentiment to Guide Dollar

Looking ahead, Pound Sterling may continue to trade under pressure given renewed worries over borrowing and taxation.

In the US, the absence of fresh economic releases leaves the Dollar likely to take its cues from broader market sentiment as the week draws to a close.

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TAGS: Pound Dollar Forecasts