Pound to Dollar Forecast: USD Surges as Oil Price, Bond Yields Climb

Modified: Thursday, 8 October 2026 22:01 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: USD Surges as Oil Price, Bond Yields Climb

The Pound to Dollar exchange rate (GBP/USD) has retreated towards key support at 1.3200 as renewed Middle East tensions triggered another surge in oil prices and global bond yields.

The Dollar attracted fresh defensive demand as equities weakened, while UK borrowing costs climbed towards 19-year highs, raising concerns that Sterling's resilience could be tested by renewed fiscal pressures.

GBP/USD Forecasts: Re-Testing Key Support

The Pound to Dollar (GBP/USD) exchange rate was unable to make further headway on Wednesday and dipped sharply to test key support near 1.3200 at the New York open.

Risk appetite deteriorated on the day with further sharp losses for bonds and a significant setback for equities as energy prices posted renewed gains. Both factors boosted the dollar.

The UK 10-year yield hit 5.50%, very close to 19-year highs and US Treasuries also registered renewed losses with the 10-year yield at 5.34% while the 30-year yield hit a fresh 24-year high.

Scotiabank commented; “Geopolitical tensions are once again in focus as market participants respond to news of fresh attacks on oil tankers in the Strait of Hormuz, sending oil prices and yields higher while denting overall improvement in the market’s tone that had been observed through much of this week.”

Fragile risk conditions underpinned the dollar and also started to unnerve the Pound. Sterling has been resilient in the face of higher yields, but there is a risk that fiscal fears will intensify and potentially damage Sterling confidence.

UoB commented; “To sustain mild upward momentum, GBP must hold above the ‘strong support’ level, now at 1.3200.” Any break would risk a slide to at least 1.3140.

ING commented on geo-political trends; “Stubbornly high oil prices continue to reflect concerns about further disruptions, even as actual oil flows have improved. With few signs of an imminent deal, energy prices should remain a drag on any meaningful recovery in bonds and, by extension, on a decline in the dollar.”

Minutes from September’s Federal Reserve policy meeting will be released later on Wednesday.

At that meeting, interest rates were increased by 25 basis points to 4.00% with a unanimous vote and most members expected further hikes before year-end.

Commonwealth Bank of Australia currency strategist Samara Hammoud commented; "With little forward guidance from Chair (Kevin) Warsh, markets have reacted sharply to each US data release and policymaker speech. We expect the Fed to wait until December before hiking again.”

According to MUFG; “An October hike now looks unlikely and the 5-6bps of pricing reflects uncertainty around the CPI data released next Wednesday. A failure of the Fed to hike this month is unlikely to do much damage to US dollar sentiment.”

It added; “The FOMC minutes from the September meeting will be released this evening and market participants will be looking for indication of how much further the fed funds rate could go.”

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TAGS: Pound Dollar Forecasts