Pound Sterling Forecast: Rising Gilt Yields Keep GBP/USD under Pressure

Modified: Tuesday, 8 September 2026 20:01 BST - Written by James Fuller

STORY LINK Pound Sterling Forecast: Rising Gilt Yields Keep GBP/USD under Pressure

The Pound US Dollar (GBP/USD) exchange rate edged lower on Tuesday, with renewed concerns over global inflation weighing on market sentiment and encouraging demand for safer assets.

At the time of writing, GBP/USD was trading at around $1.3524, down slightly from the start of Tuesday’s session.

The US Dollar (USD) gained ground on Tuesday as a fresh jump in energy prices heightened fears that inflation could prove more persistent across the global economy.

Brent crude moved closer to the $100-per-barrel threshold during Tuesday morning trading after targeted strikes hit Saudi energy infrastructure.

Investors are concerned that another sharp increase in energy costs could feed into consumer and producer prices, potentially forcing central banks around the world to maintain or even tighten restrictive monetary policy for longer.

However, the ‘Greenback’s’ gains remained relatively contained as investors adopted a cautious stance ahead of this week's US inflation figures.

The data could prove crucial in shaping expectations for whether the Federal Reserve will raise interest rates next week.

Sterling (GBP) also came under pressure on Tuesday, with the latest jump in crude prices contributing to another sell-off in UK government bonds.

Growing concerns over the inflationary impact of higher energy costs pushed borrowing costs higher, with the yield on the benchmark 10-year gilt climbing by around 0.3%.

This left yields just below the multi-year highs reached during last week's bout of bond market turbulence.

The latest increase in borrowing costs presents another challenge for Chancellor John Healey, as higher debt-servicing expenses could put additional strain on government finances and further reduce the Treasury's limited fiscal headroom ahead of October's Budget.

Near-Term GBP/USD Forecast: Broader Market Trends to Drive Trading

With no major UK or US economic releases scheduled, the Pound to US Dollar (GBP/USD) exchange rate could take its cues from broader market developments through the middle of the week.

Should inflation fears continue to dominate sentiment, investors may become increasingly reluctant to take on risk, potentially strengthening demand for safe-haven currencies such as the US Dollar.

Conversely, any signs of de-escalation in the Middle East could see energy prices retreat from their recent highs.

This could take some pressure off the ‘Greenback’ while also supporting Sterling if falling oil prices help ease concerns over UK inflation and bring gilt yields lower.

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TAGS: Pound Dollar Forecasts