Pound-to-Dollar News, Forecast: GBP/USD Holds Near Lows after Hawkish Fed Hike

Modified: Wednesday, 16 September 2026 22:31 BST - Written by David Woodsmith

STORY LINK Pound-to-Dollar News, Forecast: GBP/USD Holds Near Lows after Hawkish Fed Hike

The Pound US Dollar (GBP/USD) exchange rate remained close to recent lows on Wednesday evening after the Federal Reserve raised interest rates by 25 basis points.

At the time of writing, GBP/USD was trading at around $1.3470, leaving the pairing little changed overall from earlier in the session.

US Dollar (USD) Supported as Fed Signals Further Tightening

The US Dollar (USD) held firm on Wednesday after the Federal Reserve raised its benchmark interest rate to 3.75%-4.00%.

The decision was unanimous and marked the Fed's first interest rate increase since 2023.

With the 25-basis-point hike already heavily priced in, attention centred on the central bank's updated projections and accompanying guidance for clues over the future path of US monetary policy.

Policymakers signalled that another quarter-point increase remains likely before the end of the year, while Fed Chair Kevin Warsh stressed that inflation remains too high and that underlying price trends have not improved sufficiently.

Persistent inflationary pressures, elevated oil prices and relatively resilient economic data have strengthened expectations that the Fed could continue tightening monetary policy.

Warsh nevertheless continued to avoid firm forward guidance, leaving future decisions dependent on incoming inflation and labour-market data.

The relatively hawkish message helped the US Dollar retain support following the announcement.

The Pound (GBP) struggled to find a clear direction against its major counterparts on Wednesday following the release of the latest UK inflation figures.

Data from the Office for National Statistics (ONS) showed that annual headline inflation accelerated from 2.9% to 3.1% in August, matching market expectations.

The increase was largely driven by higher energy prices, which have risen sharply after briefly easing during July.

Despite this, there was limited evidence of broader inflationary pressure building elsewhere in the UK economy.

Core inflation remained unchanged at 2.6% in August, while services inflation also remained contained.

As a result, Sterling showed little reaction to the figures, with analysts suggesting the latest inflation reading is unlikely to materially alter expectations surrounding the Bank of England's upcoming policy decision.

Near-Term GBP/USD Forecast: BoE Decision Now in Focus

Looking ahead to Thursday, attention will turn to the Bank of England's latest interest rate announcement for the next major catalyst for the Pound to US Dollar exchange rate.

The BoE is widely expected to leave interest rates unchanged when policymakers announce their decision at midday.

With the rate decision largely anticipated, the vote split and accompanying guidance are likely to attract the most attention.

A cautious assessment of the economic outlook could weigh on Sterling if it signals limited appetite for further monetary tightening.

Conversely, stronger warnings over the inflationary impact of elevated energy prices could revive expectations for another BoE rate hike later this year and provide the Pound with some support.

Meanwhile, the latest US initial jobless claims figures could also influence the Dollar.

A renewed increase in unemployment claims may temper some of the support generated by the Fed's hawkish policy message.

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TAGS: Pound Dollar Forecasts