GBP/USD Forecast: Pound Sterling Hits 1.33 as Fed Rate Expectations Collapse

Modified: Wednesday, 30 September 2026 22:36 BST - Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Hits 1.33 as Fed Rate Expectations Collapse

The Pound US Dollar (GBP/USD) exchange rate climbed on Wednesday as the US Dollar came under renewed pressure following softer-than-expected inflation figures.

At the time of writing, GBP/USD was trading at around $1.3281, up roughly 0.4% from Wednesday’s opening levels.

The US Dollar (USD) faced heavy selling pressure on Wednesday after the latest core PCE price index pointed to a weaker inflationary backdrop than markets had anticipated.

The Federal Reserve’s preferred measure of inflation eased to 3% in August, falling well short of forecasts for a reading of 3.3%.

July’s figure was also revised lower, from 3.3% to 3%.

August's softer figures prompted a sharp reassessment of Federal Reserve interest rate expectations, with CME’s FedWatch tool showing the probability of an October hike falling to around 37%, having stood above 70% earlier in the week.

The inflation data more than offset the impact of the latest US GDP figures, which showed the pace of economic growth in the second quarter had been revised significantly higher.

The Pound (GBP) also found support on Wednesday after revised UK GDP figures offered further evidence that the domestic economy performed better than initially estimated during the second quarter.

Data released by the Office for National Statistics (ONS) confirmed quarterly growth had been revised up to 0.5%, from the previous estimate of 0.4%.

The stronger reading reinforced expectations that the Bank of England (BoE) could resume raising interest rates following its November policy meeting, providing an additional source of support for Sterling.

Near-Term GBP/USD Forecast: US Manufacturing PMI in Focus

Looking ahead to Thursday, the next major catalyst for the Pound US Dollar (GBP/USD) exchange rate is likely to be the release of the latest ISM manufacturing PMI.

A stronger-than-expected reading for September could point to continued momentum in the US factory sector and give the US Dollar an opportunity to recover some of its recent losses.

However, any reaction may prove relatively restrained as investors look ahead to Friday’s non-farm payroll figures, which are likely to provide a more important signal for the Federal Reserve’s policy outlook.

Meanwhile, with few major UK releases scheduled for the remainder of the week, Sterling could continue to take its direction from wider developments across global currency markets.

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TAGS: Pound Dollar Forecasts