Pound-to-Dollar Forecast: Hawkish Warsh Boosts USD, GBP Retreats to 1.3530

Modified: Sunday, 30 August 2026 15:01 BST - Written by James Fuller

STORY LINK Pound-to-Dollar Forecast: Hawkish Warsh Boosts USD, GBP Retreats to 1.3530

The Pound to Dollar (GBP/USD) exchange rate came under renewed pressure at the end of last week as a hawkish Jackson Hole speech from Federal Reserve Chair Kevin Warsh strengthened expectations of another US interest-rate increase.

GBP/USD retreated to around 1.3535 on Friday, down almost 0.5% on the day and well below the six-month highs above 1.3670 recorded earlier in August.

The Pound was unable to make headway in global markets, while the Dollar received fresh support as investors reassessed the outlook for Federal Reserve policy.

There remains an important support area around 1.3500-1.3550.

Scotiabank had maintained a constructive technical stance; “We see near-term support around 1.3600 and 1.3550. The trend from late June remains bullish however.”

Friday's move below 1.3550 therefore weakens the immediate technical picture, although GBP/USD remains above the broader summer lows.

Warsh Revives September Fed Hike Expectations

Federal Reserve Chair Kevin Warsh used his first Jackson Hole speech to reinforce the central bank's commitment to returning inflation to its 2% target.

Warsh warned that financial conditions remained relatively loose and indicated that the Fed could need to raise interest rates if inflation fails to moderate sufficiently.

His comments represented a more hawkish message than investors had expected.

Markets subsequently raised the probability of a September rate increase to around 55%, compared with roughly 35% ahead of the speech.

This shift in expectations provided renewed support for US bond yields and the Dollar.

Danske Bank had commented ahead of the speech; “Markets will look for any hints about monetary policy in September.”

The speech ultimately provided a clearer signal than many investors had anticipated.

ING had previously maintained that the Fed would remain on hold in September, but acknowledged that stronger data or more hawkish communication could change market pricing.

The coming US inflation and employment figures will now carry even greater importance.

Energy Prices Remain Important for Central Banks

Energy prices will continue to be an important backdrop for monetary policy on both sides of the Atlantic.

MUFG commented; “The price of crude oil continues to defy expectations of sharper price rises and how the energy price story plays out over the coming weeks will be an important backdrop heading into a heavy month of G10 central bank meetings.”

Every major G10 central bank is due to meet during September, leaving markets unusually sensitive to shifts in inflation expectations and bond yields.

Higher energy prices would strengthen the argument for tighter monetary policy, while a sustained decline would reduce pressure on central banks to act.

UK rate expectations have moved in the opposite direction to the US in recent sessions.

Markets no longer fully price another Bank of England rate increase until early 2027, with only a limited probability attached to a September move.

Most economists expect the BoE to keep Bank Rate unchanged at 3.75% for the remainder of 2026.

Wider US economic fundamentals also continue to provide some support for the Dollar.

Brown Brothers Harriman global head of markets strategy Elias Haddad commented; “The big support for the dollar here is that the U.S. economy continues to outpace that of other major economies.”

He nevertheless remains cautious over the medium-term outlook.

Haddad added; “I don't expect the dollar to make new highs, because of the risk of a more dovish Fed repricing and the lack of U.S. fiscal credibility are two big headwinds.”

US fiscal concerns remain significant, particularly after the recent surge in long-term Treasury yields and the Treasury's decision to expand bond buybacks.

European central bankers have also expressed unease over increasingly unconventional US Treasury actions and the risk that political pressure could spill over into monetary and currency policy.

Near-Term GBP/USD Forecast: 1.35 Support Comes into Focus

GBP/USD has now surrendered most of the gains made during the middle of August.

The 1.3500-1.3530 area is the immediate support zone.

A sustained break below 1.3500 would weaken the short-term structure further and could expose 1.3450 followed by the August low around 1.3420.

On the upside, Sterling would need to regain 1.3600 to ease the immediate downward pressure.

A recovery above 1.3650 would be required to restore the stronger bullish structure seen earlier in August.

The combination of higher Fed rate expectations and weaker Bank of England tightening bets favours the Dollar, leaving upcoming US inflation and labour-market data crucial for the next GBP/USD move.

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TAGS: Pound Dollar Forecasts