Pound Forecast: GBP/USD Nears 1.33 as Fed Eyes Bigger Rate Hike

Modified: Wednesday, 11 November 2026 20:16 BST - Written by Frank Davies

STORY LINK Pound Forecast: GBP/USD Nears 1.33 as Fed Eyes Bigger Rate Hike

The Pound to US Dollar (GBP/USD) exchange rate extended its losses on Wednesday as growing speculation over a larger Federal Reserve interest rate hike provided further support for the 'Greenback'.

At the time of writing, GBP/USD was trading at approximately $1.3318, down around 0.2% from Wednesday's opening levels and approaching the $1.3300 mark.

The US Dollar (USD) maintained its upward momentum as investors continued to reassess the Federal Reserve's monetary policy outlook following Tuesday's stronger-than-expected inflation figures.

October's US consumer price index (CPI) showed headline inflation rising by 0.4% month on month, exceeding forecasts for a 0.3% increase.

The figures reinforced concerns that inflationary pressures remain persistent, raising the possibility that US policymakers may need to tighten monetary policy more aggressively than previously anticipated.

Adding to the Dollar's appeal were hawkish comments from Federal Reserve Governor Christopher Waller.

Waller suggested that policymakers should keep the possibility of a larger, 50-basis-point interest rate increase in December under consideration if underlying inflation proves difficult to contain.

His remarks encouraged investors to reconsider the likely pace of monetary tightening, with the prospect of a more substantial increase providing additional support for the US currency.

The shift in expectations has helped the Dollar build on Tuesday's sharp gains, when stronger inflation figures triggered a broad rally against other major currencies.

Although a quarter-point increase remains the more widely anticipated outcome for December, the possibility of a larger move has added to the Dollar's appeal.

The Pound (GBP), meanwhile, struggled against most of its major peers as fresh criticism of the Bank of England's (BoE) approach to inflation weighed on Sterling sentiment.

The National Institute of Economic and Social Research (NIESR) warned that the central bank's relatively cautious approach to raising interest rates risks allowing inflation to remain above its 2% target for an extended period.

The BoE raised Bank Rate by 25 basis points to 4% last week, with policymakers unanimously supporting tighter monetary policy.

However, the pace of tightening has remained relatively measured compared with several other major central banks, despite the renewed inflationary pressures caused by higher energy prices.

NIESR suggested that UK borrowing costs may ultimately need to reach 5% to bring underlying inflation back under control.

Such an outcome would require considerably more tightening than the Bank of England's latest guidance currently implies.

The warning has highlighted the difficult balance facing UK policymakers, who must contain persistent inflation without placing excessive pressure on an already fragile economy.

While the prospect of higher interest rates can support a currency, concerns that the BoE may be falling behind inflation have complicated the outlook for Sterling.

Investors also remained cautious ahead of Thursday's UK GDP figures, leaving the Pound without a clear source of support against the strengthening Dollar.

Near-Term GBP/USD Forecast: Can Stronger UK GDP Prevent a Fall Below $1.33?

The Pound to US Dollar exchange rate could find some relief on Thursday if the latest UK economic growth figures exceed expectations.

Preliminary estimates for the third quarter are expected to show GDP growth accelerating from 0.5% to 0.7%.

A stronger-than-expected reading would provide reassurance that the British economy remains resilient despite elevated borrowing costs.

It could also strengthen expectations that the Bank of England has room to raise interest rates further, potentially offering support for Sterling.

However, disappointing GDP figures would reinforce concerns about the UK's economic outlook and raise questions about how much additional tightening the economy can withstand.

Such an outcome could leave the Pound vulnerable to further losses, particularly if the US Dollar maintains its recent momentum.

The 'Greenback' will also be influenced by a series of speeches from Federal Reserve policymakers scheduled for Thursday.

Investors will be watching closely for any indication that other officials share Christopher Waller's concerns about persistent inflation and support the possibility of a larger December interest rate increase.

Further hawkish comments could strengthen expectations of more aggressive monetary tightening, potentially driving additional demand for the Dollar.

Conversely, if other policymakers signal a preference for a more measured approach, some of the recent upward pressure on the US currency could ease.

For GBP/USD, the $1.3300 level remains an important near-term threshold following Wednesday's decline.

A sustained move below this level could expose Sterling to further selling pressure, while stronger UK growth figures or less hawkish Fed commentary could help the pairing recover towards $1.3400.

With both UK GDP and Federal Reserve commentary due on Thursday, the balance between the two central banks' interest rate outlooks is likely to remain a key driver of the exchange rate.

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TAGS: Pound Dollar Forecasts