Pound to Dollar Week Ahead Forecast: 1.31 Target as GBP Slides

Modified: Monday, 28 September 2026 07:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: 1.31 Target as GBP Slides

The Pound to Dollar exchange rate (GBP/USD) has fallen to 12-week lows near 1.3200 as aggressive Federal Reserve tightening expectations strengthen the Dollar while fiscal concerns undermine Sterling.

The Bank of England is also coming under increasing pressure to raise rates as elevated energy prices persist, but doubts over how much tightening the UK economy can withstand leave the Pound facing an increasingly difficult backdrop.

GBP/USD Forecasts: BoE pressures intensify

Credit Agricole has a 3-month Pound to Dollar (GBP/USD) exchange rate forecast of 1.31 as the dollar makes further gains.

UBS also sees the risk of further near-term selling, but would buy on dips and is backing gains to 1.41 by June 2027. It noted; “Our view that Fed rate expectations have reached peak hawkishness also supports selling downside in GBP/USD.”

GBP/USD came under sustained pressure during the week with 12-week lows near 1.3200. The dollar strengthened further on expectations of multiple Federal Reserve rate hikes while the Pound lost ground in global markets on debt fears.

Markets are now pricing in close to a 70% chance of a Fed rate hike in October and over a 50% chance that there will be two further rate hikes by the end of this year.

Credit Agricole sees scope for further dollar buying; “We also note that despite its recent appreciation across the board, the USD is still trading at a discount when compared to its relative rate advantage over the rest of G10 FX. This much could suggest that the currency has further ‘catching up’ to do, especially if US rates markets continue to price in further Fed tightening ahead in the wake of next week’s data releases.

Standard Chartered considers that risks are more balanced; “Further tightening should keep US front-end yields elevated and support the USD. However, money markets already price a more aggressive Fed hiking path than our expectations, limiting the scope for further USD gains and leaving the USD vulnerable if incoming data weaken the case for additional hikes.”

As far as UK rates are concerned, markets are pricing in around a 75% chance of a BoE rate hike at the November meeting while traders are pricing in four rate hikes over the next 12 months.

There have been further warnings from BoE officials that rates may need to hike.

According to Governor Bailey; "We haven't increased Bank Rate. It's going to get harder to maintain that stance the longer we have high energy prices.” Deputy Governor Lombardelli expressed a similar view.

There are, however, still notable doubts whether the BoE will hike rates aggressively.

According to BBH; “In our view, the BoE may not need to tighten as much as markets expect. The UK economy is already operating below capacity, the Bank Rate at 3.75% is near the top of the BoE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive."

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TAGS: Pound Dollar Forecasts