GBP/USD Price Forecast: Hot US Inflation Sends Pound Sterling Sharply Lower

Modified: Tuesday, 10 November 2026 19:31 BST - Written by Frank Davies

STORY LINK GBP/USD Price Forecast: Hot US Inflation Sends Pound Sterling Sharply Lower

The Pound to US Dollar (GBP/USD) exchange rate tumbled on Tuesday as stronger-than-expected US inflation figures fuelled expectations of another Federal Reserve interest rate hike.

At the time of writing, GBP/USD was trading at approximately $1.3332, down 0.8% on the day and reversing Monday's gains as the US Dollar staged a sharp recovery.

The US Dollar (USD) strengthened against most major currencies after the latest US consumer price index (CPI) revealed that inflationary pressures remained more persistent than markets had anticipated.

October's inflation report contained only monthly figures, reflecting disruptions to the annual comparisons caused by the federal government shutdown in October last year.

Nevertheless, the available data provided a clear indication that price pressures were running hotter than expected.

Core inflation, which excludes volatile food and energy prices, increased by 0.3% month on month, exceeding forecasts for a 0.2% rise.

Headline inflation also surprised to the upside, climbing 0.4% against expectations of a 0.3% increase.

The stronger readings reinforced concerns that inflation remains difficult to contain, despite the Federal Reserve's previous efforts to bring price growth under control.

For investors, the figures strengthened the argument that US policymakers will need to raise borrowing costs again in December.

Following the release, financial markets priced in a 90% probability of a 25-basis-point increase at the Fed's next meeting, alongside a 10% chance of a larger 50-basis-point hike.

The shift in interest rate expectations provided a substantial boost to the Dollar, with investors anticipating that US borrowing costs could remain elevated for longer than previously expected.

Higher interest rates generally increase the appeal of Dollar-denominated assets, particularly when expectations for monetary tightening strengthen relative to other major economies.

Tuesday's inflation surprise therefore helped the 'Greenback' recover much of the ground it had lost during Monday's risk-on rally.

The Pound (GBP), meanwhile, struggled to establish any meaningful support as a quiet UK economic calendar left Sterling without a fresh domestic catalyst.

Investors remained cautious ahead of Thursday's preliminary third-quarter GDP figures, which are expected to provide an important indication of the British economy's resilience.

The upcoming data has taken on additional significance following last week's hawkish Bank of England (BoE) interest rate decision.

Policymakers unanimously voted to raise Bank Rate to 4%, with the accompanying guidance suggesting that further increases could be necessary to contain persistent inflation.

However, concerns remain about the impact of higher borrowing costs on UK households and businesses, particularly as the economy continues to face an uncertain growth outlook.

Thursday's GDP figures could therefore influence expectations for how aggressively the BoE will tighten monetary policy over the coming months.

For now, the absence of significant UK data left Sterling unable to resist the Dollar's inflation-driven advance, pushing GBP/USD sharply lower during Tuesday's session.

Near-Term GBP/USD Forecast: Can Improving Risk Appetite Offset Dollar Strength?

The Pound to US Dollar exchange rate could remain sensitive to broader market sentiment on Wednesday, with few major economic releases scheduled in either the UK or US.

Following Tuesday's stronger-than-expected inflation figures, investors are likely to continue assessing the implications for the Federal Reserve's December interest rate decision.

With markets now heavily favouring another rate increase, expectations of tighter US monetary policy could provide underlying support for the Dollar.

However, renewed optimism surrounding diplomatic efforts to end the conflict in the Middle East may offer some relief for Sterling.

Hopes of progress towards a peace agreement have recently helped improve global risk appetite, encouraging investors to move away from traditional safe-haven currencies.

If this more positive market mood returns, demand for the US Dollar could ease, potentially allowing GBP/USD to recover some of Tuesday's losses.

Nevertheless, any rebound may prove limited if investors remain focused on the prospect of further Federal Reserve tightening.

For the Pound, attention will increasingly turn towards Thursday's UK GDP release.

Economists expect quarterly growth to have accelerated from 0.5% to 0.7%, with a stronger reading potentially reinforcing expectations that the Bank of England has room to raise interest rates further.

However, disappointing figures could revive concerns about the UK's economic outlook and weaken Sterling's appeal.

With GBP/USD trading around $1.3332, the $1.3300 level represents an important near-term reference point.

A sustained move below this threshold could expose the pairing to further losses, particularly if US interest rate expectations continue to strengthen.

Conversely, an improvement in risk appetite could help Sterling recover towards $1.3400, although the Dollar's renewed momentum may make a sustained rebound difficult ahead of Thursday's UK growth figures.

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TAGS: Pound Dollar Forecasts