Pound to Dollar Week Ahead Forecast: 19-Year High Gilt Yields Put BoE in Focus

Modified: Monday, 14 September 2026 07:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: 19-Year High Gilt Yields Put BoE in Focus

The Pound to Dollar exchange rate (GBP/USD) has remained close to 1.3500 as investors prepare for a crucial Bank of England decision following another surge in UK borrowing costs.

Stronger UK growth has helped Sterling resist selling pressure, but markets may be vulnerable to a reassessment if the BoE pushes back against expectations for three or more rate hikes over the coming year.

GBP/USD Forecasts: BoE Rate Hike?

SEB forecasts that the Pound to Dollar (GBP/USD) exchange rate is liable to edge lower in the short term, but forecasts that there will be gains to 1.40 by the end of next year as the dollar loses ground.

ING has a 12-month GBP/USD forecast of 1.32 on expectations that the Pound loses ground as the Bank of England (BoE) fails to match market expectations.

GBP/USD was held near 1.35 for much of the week. Stronger than expected GDP data helped underpin the Pound, but the main focus was a surge in bond yields in the UK and US,

The UK 10-year yield increased to 19-year highs above 5.20%.

The BoE will announce its latest rate decision this week with consensus forecasts that rates will be held at 3.75% on a split vote.

Scotiabank is still positive on the Pound outlook; “we await a break of the tight short-term range but continue to feel that medium-term risks lean bullish given the clear ascending trend channel from late June.”

Monetary policy will also be a key element with markets pricing in at least three and potentially four BoE rate hikes by the middle of 2027.

Credit Agricole commented; “we still think that there remains a solid majority at the MPC that continues to (1) see little evidence of second-round effects in the UK economy and (2) expect that the persistent softness of UK labour markets could become a more dominant drag on inflation from here.”

It added; “As a result, the updated forward guidance could continue to suggest that the BoE remains undecided on the need to tighten further and thus deal a blow to the very hawkish market expectations. If confirmed, a dovish hold could erode the GBP rate appeal across G10.”

Fiscal policy will be a growing focus, especially with higher bond yields putting upward pressure on debt interest payments and undermining fiscal headroom.

ING commented; “The focus could shift over the next couple of months to the fiscal side, with new Chancellor John Healey delivering his first budget on 28 October. Presumably, fiscal credibility will be paramount, but investors will be interested in any possible GBP-negative tax rises emerging.”

SEB has a generally negative stance on the US currency amid Wall Street concerns; “The Dollar’s safe haven dynamic in a bigger equity correction can come to be tested.”

It added; “Increasingly USD is supported by equity inflows while foreign investors have reduced FX hedge ratios. This means that derisking/repatriation is accompanied with selling Dollars.

Alternatively, a shift from US equities to US Treasuries would be associated with selling USD as well.”

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TAGS: Pound Dollar Forecasts