GBP/USD Forecast: Pound Sterling Steady Ahead of Fed Decision

Modified: Wednesday, 18 March 2026 18:01 BST - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Steady Ahead of Fed Decision

The Pound to US Dollar (GBP/USD) exchange rate moved little on Wednesday, with traders opting for caution ahead of the Federal Reserve’s upcoming interest rate decision.

At the time of writing, GBP/USD hovered around $1.3358, showing minimal movement from the start of the session.

The US Dollar remained confined to a tight range during European trading hours, as investors held back from making significant moves ahead of the Federal Reserve’s latest policy announcement.

Although no changes to interest rates are expected, attention is firmly on the Fed’s guidance and remarks from Chair Jerome Powell for clues on the direction of future monetary policy.

Markets are particularly focused on how policymakers interpret the inflationary impact of the ongoing tensions in the Middle East, which have pushed global energy prices sharply higher in recent weeks.

Fears that inflation could remain elevated for longer have already led some analysts to delay their expectations for when the Federal Reserve might begin easing policy.

Should the Fed signal a later timeline for rate cuts, or even hint at further tightening, the US Dollar could jump.

The Pound was largely stable, as a modest decline in energy prices offered some respite to UK bond markets.

Government borrowing costs edged lower, with two-year yields slipping as falling oil prices helped ease some of the immediate inflationary pressure on the UK economy.

At the same time, investors remained cautious toward Sterling, refraining from placing strong directional bets ahead of the Bank of England’s own policy decision.

Short-Term GBP/USD Forecast: BoE Guidance in Focus

Attention will shift to the Bank of England’s interest rate announcement, which is expected to be the next major driver for the Pound to US Dollar exchange rate.

As with the Federal Reserve, policymakers are not expected to alter rates at this meeting, leaving forward guidance as the key area of interest. Any indication that rates may need to rise again to counter inflation could provide support for the Pound.

For the US Dollar, geopolitical developments will remain important, with any escalation in the Middle East likely to revive demand for safe-haven assets.

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TAGS: Pound Dollar Forecasts