Pound to Dollar Forecast: GBP/USD Swings after Fed Hike and BoE Hold

Modified: Thursday, 17 September 2026 23:16 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP/USD Swings after Fed Hike and BoE Hold

The Pound US Dollar (GBP/USD) exchange rate experienced a volatile session on Thursday as the latest interest rate decisions from the US and UK central banks sent ripples through currency markets.

At the time of writing, GBP/USD was trading around $1.3380, little changed from the start of the day after earlier dropping to a seven-week low.

The US Dollar (USD) slipped back slightly on Thursday after surging to a seven-week high against the Pound (GBP) on Wednesday evening following the Federal Reserve’s latest interest rate decision.

The Fed unanimously opted to raise interest rates for the first time since 2023, taking the Fed funds rate to 4%.

Although the move had been widely anticipated, the unanimous vote and hawkish tone from policymakers gave the US Dollar a boost.

The Pound managed to claw back some ground from its multi-week lows on Thursday, although gains remained constrained ahead of the Bank of England’s (BoE) latest interest rate decision.

Sterling then endured a choppy response to the announcement, initially tumbling to a fresh multi-week low before recovering its losses.

The BoE opted to leave interest rates unchanged, with policymakers voting six to three to hold.

While this outcome broadly matched market expectations, the decision was viewed as slightly dovish.

However, the BoE also flagged concerns over upside risks to inflation linked to the ongoing war in Iran, helping to cushion the Pound’s decline.

Near-Term GBP/USD Forecast: Could UK Retail Sales Weigh on the Pound?

Looking to the end of the week, the latest UK retail sales figures could provide a fresh catalyst for GBP movement.

Economists expect sales growth to fall by 0.2% in August, following a 0.5% contraction in July.

A result in line with forecasts would point to another decline in consumer spending, potentially raising further concerns about the health of the UK economy and putting pressure on GBP.

Across the Atlantic, a modest increase in US industrial production for August could offer some support to USD.

The GBP/USD exchange rate may also remain sensitive to shifts in risk appetite.

A deterioration in sentiment could drive demand for the safe-haven Dollar, while leaving the increasingly risk-sensitive Pound vulnerable.

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TAGS: Pound Dollar Forecasts