GBP to USD Forecast: Bond Market Turmoil Puts Pound Sterling Under Pressure

Modified: Wednesday, 2 September 2026 22:31 BST - Written by Frank Davies

STORY LINK GBP to USD Forecast: Bond Market Turmoil Puts Pound Sterling Under Pressure

The Pound US Dollar (GBP/USD) exchange rate came under pressure on Wednesday, falling to its lowest level in around two weeks as a sharp selloff across global bond markets unsettled investors.

At the time of writing, GBP/USD was trading at around $1.3477, down roughly 0.3% from Wednesday’s opening levels.

The US Dollar (USD) strengthened against most of its major counterparts on Wednesday, with mounting turmoil in government bond markets prompting investors to seek the relative safety of the ‘Greenback’.

Bond yields have surged across major economies in recent sessions, driven by a combination of elevated energy prices, lingering inflation concerns and growing fears over government finances.

The rise in borrowing costs has raised expectations that central banks could be required to maintain restrictive monetary policy for longer.

The US Dollar has also benefited from a renewed shift in Federal Reserve expectations, with markets now pricing in a roughly 70% chance of an interest rate hike later this month. This represents a significant increase from the previous week's expectations.

The Pound (GBP) struggled to gain traction on Wednesday as the global bond selloff was mirrored in the UK, sending government borrowing costs sharply higher.

The benchmark 10-year gilt yield remained around its highest level since 2008, while the 30-year yield climbed to levels last seen in 1998.

Although the rise in UK yields forms part of a broader move across international bond markets, the sharp increase presents particular challenges for the UK government.

With Chancellor John Healey preparing next month's Autumn Budget, higher debt-servicing costs could eat further into the Treasury's already limited fiscal headroom and make planned spending commitments harder to deliver.

Near-Term GBP/USD Forecast: US Services Activity in Focus

Looking ahead, the publication of the latest ISM services PMI could provide the next significant catalyst for the Pound to US Dollar (GBP/USD) exchange rate.

The August index is expected to show that growth across the US services sector picked up, which could provide another boost to the US Dollar and reinforce expectations of further Federal Reserve tightening.

However, any reaction may be relatively contained, with investors likely to remain cautious ahead of Friday's highly anticipated non-farm payrolls report.

Meanwhile, GBP investors will turn their attention to a scheduled speech from Bank of England (BoE) Governor Andrew Bailey later in the week.

Should Bailey reiterate his recent cautious stance on further monetary tightening, Sterling could come under additional pressure as expectations for a BoE rate hike later this year are scaled back.

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TAGS: Pound Dollar Forecasts