GBP/USD Forecast: Pound-Dollar Slips as Fed Rate Hike Bets Support Dollar

Modified: Tuesday, 29 September 2026 19:31 BST - Written by James Fuller

STORY LINK GBP/USD Forecast: Pound-Dollar Slips as Fed Rate Hike Bets Support Dollar

The Pound US Dollar (GBP/USD) exchange rate slipped lower on Tuesday as a subdued market mood continued to favour safe-haven currencies.

At the time of writing, GBP/USD was trading at around $1.3227, down approximately 0.2% from Tuesday’s opening levels.

The US Dollar (USD) edged higher on Tuesday as persistent strength in energy prices encouraged investors to favour defensive assets.

Brent crude continued to trade comfortably above $100 a barrel amid uncertainty surrounding attempts to bring the US-Iran conflict to an end and negotiations over the possible reopening of the Strait of Hormuz.

The ‘Greenback’ was also benefiting from firm Federal Reserve interest rate expectations, with markets pricing in around a 72% probability of another 25-basis-point rate increase in October.

However, USD gains remained relatively restrained in early Tuesday trade as investors looked ahead to the latest JOLTS job openings figures.

A weaker-than-expected reading could point to a cooling US labour market and prompt markets to scale back their expectations for further Fed tightening.

The Pound (GBP) lacked a clear sense of direction on Tuesday, with Sterling moving within a narrow range as the UK economic calendar offered little in the way of fresh market-moving data.

Investors were also reluctant to make significant bets ahead of Prime Minister Andy Burnham’s keynote speech at the Labour Party conference.

Burnham is expected to discuss several long-running policy issues, including potential changes to the pension triple lock and his position on the UK’s relationship with the European Union.

Any comments on closer ties with the EU could attract attention from currency markets.

Near-Term GBP/USD Forecast: Core PCE Inflation in Focus

Looking ahead, the main catalyst for the Pound US Dollar (GBP/USD) exchange rate on Wednesday is likely to be the release of the latest core PCE price index.

The Federal Reserve’s preferred measure of underlying inflation is expected to show that price pressures increased again in August.

A stronger-than-expected reading could reinforce expectations of an October rate hike and provide further support for the US Dollar.

UK investors will also have the final estimate of second-quarter GDP to consider.

However, barring a significant revision to the previous reading, Sterling may remain more sensitive to broader shifts in global risk appetite than domestic economic developments.

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TAGS: Pound Dollar Forecasts