Pound to Dollar Forecast: Middle East Risks, US CPI Put GBP on Alert

Modified: Tuesday, 13 October 2026 11:46 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: Middle East Risks, US CPI Put GBP on Alert

The Pound to Dollar exchange rate (GBP/USD) has held firm around 1.3240 after avoiding another test of support near 1.3200, but escalating geopolitical tensions threaten to revive Dollar demand.

Fresh Houthi attacks on Saudi Arabian energy assets and uncertainty surrounding Russia and Ukraine have kept oil markets on alert, while Wednesday's US inflation report could reinforce expectations of another Federal Reserve rate hike in December.

GBP/USD Forecasts: Holding Support

The Pound to Dollar (GBP/USD) exchange rate has avoided a further test of support in the 1.3200 area and is trading around 1.3240 on Monday.

The dollar held a firm tone in global markets while the Pound was still resilient in global markets. Trading is liable to be curbed on Monday by the US Columbus Day holiday, although overall volatility is liable to increase, especially with major geo-political uncertainty.

Key support continues just below 1.32. According to UoB; “mild downward pressure has eased. From here, instead of expecting GBP to edge lower, we expect it to trade in a range between 1.3170 and 1.3280.”

Over the weekend, there were Houthi attacks on Saudi Arabia with the Russia-Ukraine developments also a key issue.

Commonwealth Bank of Australia commented; "We expect the Houthis to continue their attacks on Saudi Arabian energy assets, supporting gains in the oil price and the USD."

ING noted the important element of uncertainty; “Energy prices do not quite know what to make of weekend developments, where Houthi strikes against Saudi Arabia have escalated local tensions, while at the same time US President Donald Trump has tried to present an 'energy ceasefire' between Russia and Ukraine. On the latter, Russia has yet to respond to the invite and continues to target energy infrastructure in Ukraine.

Domestically, budget chatter will intensify ahead of the budget on October 28th. As far as data is concerned, the latest UK data is due for release on Thursday. Consensus forecasts are for a 0.1% decline for August after a 0.4% gain for July.

The latest US inflation data will be released on Wednesday. Consensus forecasts are for the headline inflation rate to increase to 3.6% from 3.4% previously while the core rate is expected to edge higher to 2.5% from 2.4%.

According to ING; “Barring a big fall in energy prices this week, which seems unlikely, Wednesday's release of September US CPI inflation looks set to keep those Fed tightening expectations broadly intact. This points to the dollar staying supported by the cyclical story for a good while yet.”

Markets are not expecting a rate hike this month, but are pricing in over an 85% chance of a December move.

MUFG added; “Unless there is a significant upside surprise for underlying inflation, we expect the Fed to leave rates on hold this month. It is likely to be only a temporary pause as the Fed currently plans to hike rates again before the end of this year in December.”

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TAGS: Pound Dollar Forecasts