GBP/USD Price Forecast: Hawkish Fed Expectations Keep US Dollar Supported

Modified: Tuesday, 23 June 2026 20:01 BST - Written by David Woodsmith

STORY LINK GBP/USD Price Forecast: Hawkish Fed Expectations Keep US Dollar Supported

The Pound to US Dollar (GBP/USD) exchange rate edged lower on Tuesday as investors reacted to the latest UK purchasing managers’ index data.

At the time of writing, GBP/USD was trading close to $1.3224, down roughly 0.2% compared with Tuesday's opening levels.

The Pound (GBP) came under selling pressure on Tuesday after fresh survey data painted a weaker-than-expected picture of the UK economy.

Markets had anticipated that June’s preliminary PMI figures would show a return to growth in the UK’s dominant services sector. Instead, the data revealed that activity contracted at a faster pace than in the previous month, dampening confidence in the economic outlook.

The disappointing release prompted investors to further scale back expectations for future Bank of England (BoE) policy tightening. Some analysts now believe the central bank could keep interest rates unchanged for the rest of 2026.

The US Dollar (USD) remained firmly bid throughout Tuesday’s session as markets continued to digest the implications of the Federal Reserve’s latest policy meeting.

Demand for the ‘Greenback’ was underpinned by expectations that US interest rates may stay elevated for an extended period, with investors increasingly embracing a higher-for-longer outlook.

Although the Fed left borrowing costs unchanged at its most recent meeting, officials struck a relatively hawkish tone, indicating that further policy tightening cannot be ruled out should inflationary pressures prove stubborn.

Additional support for USD came from a cautious market mood, as weakness across global technology stocks encouraged investors to seek the safety of traditional haven assets.

Near-Term GBP/USD Forecast: Political Developments Could Drive Sterling

With little in the way of major economic releases scheduled over the next couple of days, movements in the Pound to US Dollar (GBP/USD) exchange rate may be driven largely by developments on the UK political front.

As Andy Burnham looks all but guaranteed to succeed Keir Starmer as Prime Minister, investors are increasingly focused on who may be selected for key cabinet positions. In particular, any indications regarding the next Chancellor could have implications for market sentiment toward the UK.

Sterling traders may also pay close attention to comments from BoE policymaker Sarah Breeden on Wednesday. Given her reputation as one of the more dovish members of the Monetary Policy Committee, any suggestion that rates are likely to remain on hold could weigh on the Pound.

For the US Dollar, broader market sentiment may remain the primary driver in the near term, with investors awaiting a series of high-profile US economic releases due later in the week.

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TAGS: Pound Dollar Forecasts