Pound to Dollar Forecast: US Inflation Now Key to September Fed Hike

Modified: Tuesday, 8 September 2026 17:36 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: US Inflation Now Key to September Fed Hike

The Pound to Dollar exchange rate (GBP/USD) recovered to around 1.3535 after once again finding support below the 1.3500 level, as the Dollar failed to hold gains following Friday's stronger US jobs report.

Markets remain divided over whether the Federal Reserve will raise rates this month, leaving Friday's US inflation data as the next major catalyst for the pair.

GBP/USD Forecasts: Further Support Below 1.35

The dollar posted gains in immediate response to Friday’s US jobs data, but failed to hold the gains.

The Pound to Dollar (GBP/USD) exchange rate again found support below 1.3500 and advanced to a.3535 on Monday.

UoB now considers the outlook is less bearish and is expecting a near-term range of 1.3480-1.3600.

US markets were closed for the Labor Day holiday on Monday, but Treasuries lost ground in futures trading with the 10-year yield near 4.80%.

The yen posted renewed gains in global markets which was an important factor curbing immediate dollar support.

The US labour-market data was stronger than expected with a reported increase in non-farm payrolls of 162,000 for August compared with consensus forecasts of around 55,000 while the unemployment rate held at 4.1%.

Markets are now pricing in around a 60% chance of a rate hike this month. Immediate attention will focus on the bond market. Although US markets were closed, there was net weakness in bond futures with the indicative 10-year yield around 4.80%.

ING noted the risk of dollar losses on debasement fears, but added; “We prefer to back the themes of higher energy prices and an under-priced Fed giving some support to the dollar in the near term.”

According to MUFG; “Overall, the last week’s latest developments including the nonfarm payrolls report for August and dovish comments from Fed Vice Chair Williams and Fed Governor Waller leave the prospect of a Fed hike this month finely balanced encouraging expectations that Friday’s CPI could tip the balance. Core inflation has undershot expectations in two out of the last three months, and another soft report may be required to prevent a hike this month with the price of oil trading back closer to USD100/barrel.”

Consensus forecasts are for the headline inflation rate to hold at 3.4%. Core prices are expected to increase 0.2% on the month with the annual rate retreating slightly to 2.4% from 2.5%.

Elias Haddad, global head of markets strategy at BBH commented; “A hot CPI print would all but seal a September hike and underpin a firmer U.S. dollar. A cooler reading would strengthen the case for a hold and leave the U.S. dollar vulnerable to a dovish Fed repricing."

Domestically, the Pound drew limited support from recent comments from Bank of England chief economist Pill.

Scotiabank commented; “Messaging from MPC policymakers has taken a somewhat hawkish turn, with notable comments from Chief Economist Pill seeking to manage the extent of pricing favored by markets while still leaning to hikes overall.”

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TAGS: Pound Dollar Forecasts