Pound Sterling Forecast: Fed Rate Hike Bets and Makerfield Vote Weigh on GBP

Modified: Thursday, 18 June 2026 21:01 BST - Written by Frank Davies

STORY LINK Pound Sterling Forecast: Fed Rate Hike Bets and Makerfield Vote Weigh on GBP

The Pound US Dollar (GBP/USD) exchange rate tumbled to a ten-day low on Thursday as markets digested the Federal Reserve’s latest interest rate decision and continued to price in uncertainty around the UK outlook.

At the time of writing, GBP/USD was trading at $1.3294, down close to 0.4% on the day.

The US Dollar (USD) advanced on Thursday, building on a sharp rally from the previous evening after the Federal Reserve delivered its latest interest rate decision.

While the Fed opted to leave interest rates unchanged, investors read the announcement as hawkish. Policymakers debated the possibility of raising rates, while the bank also dropped previous language that had pointed towards potential cuts.

The Fed’s updated interest rate projections also suggested that further tightening could still be on the table in the months ahead. Following the decision, bets on a September rate hike rose from around 54% to 63%.

This repricing of Fed expectations helped the ‘Greenback’ extend its gains into Thursday’s session.

The Pound (GBP) lost further ground on Thursday morning, with investors looking past the UK’s latest jobs figures as the Bank of England (BoE) interest rate decision and Makerfield by-election came into focus.

Sterling failed to draw support from an otherwise encouraging labour market report. The data showed a surprise fall in unemployment, wage growth beating forecasts, and indications that hiring conditions remained resilient.

However, GBP investors appeared cautious ahead of the BoE’s policy announcement, with markets bracing for a potentially dovish message from the central bank.

At the same time, political uncertainty surrounding the Makerfield vote kept additional pressure on the Pound.

Near-Term GBP/USD Forecast: Makerfield Outcome to Weigh on Sterling?

Looking ahead, the GBP/USD exchange rate could see movement on Friday morning with the release of the UK’s latest retail sales figures.

Markets expect May’s data to show a return to growth, with sales forecast to rise by 0.5% after April’s sharp 1.3% decline. A stronger reading could suggest that consumer activity is proving more resilient than feared, potentially offering the Pound some support.

However, Sterling’s upside may be limited by domestic political uncertainty. Investors will also be assessing the result of the Makerfield by-election, amid speculation that Prime Minister Keir Starmer could face a leadership challenge.

As for the US Dollar, a lack of major US data may leave the safe-haven ‘Greenback’ exposed to shifts in market sentiment. If optimism around peace efforts continues to buoy risk appetite, USD could surrender some of its recent gains.

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TAGS: Pound Dollar Forecasts