Pound to Dollar Forecast: Hawkish Fed Drives Sterling to November Lows

Modified: Thursday, 12 November 2026 17:31 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: Hawkish Fed Drives Sterling to November Lows

The Pound to Dollar exchange rate (GBP/USD) fell to fresh November lows near 1.3250 as stronger-than-expected US inflation and increasingly hawkish Federal Reserve commentary drove Treasury yields sharply higher.

Pound Sterling found little support from robust UK growth figures, with markets now considering the possibility of a larger 50-basis-point Fed rate hike in December.

GBP/USD Forecasts: Slide to Fresh November Lows

The Pound to Dollar (GBP/USD) exchange rate remained under heavy pressure on Thursday as hotter US inflation and increasingly hawkish Federal Reserve rhetoric continued to support the Dollar.

GBP/USD fell towards 1.3250 before recovering slightly towards 1.3270, extending the sharp losses recorded earlier in the week.

The Dollar index climbed to a 19-month high as widening US rate differentials strengthened demand for the currency.

The Pound broadly held its position against other major currencies, with stronger UK growth data offering some protection, but this was not enough to offset the powerful Dollar move.

Hot Inflation Raises Risk of Bigger Fed Hike

The latest US inflation figures reinforced expectations that the Federal Reserve will raise interest rates again in December.

Headline consumer prices increased 0.4% in October, slowing from September's 0.6% increase as energy inflation eased.

The more important core measure increased 0.3% for a third consecutive month, compared with consensus forecasts for a smaller 0.2% increase.

The data triggered a sharp sell-off in US government bonds, with the two-year Treasury yield recording its largest daily increase since April 2025.

CIBC commented; “This report continues to show no signs of disinflation on core inflation in the US.”

Federal Reserve Governor Christopher Waller also opened the door to a more aggressive move in December.

According to ING; “The case is increasingly building for the Fed to take rates into restrictive territory to slow aggregate demand and bring inflation back to target. While Waller's suggestion of a 50bp hike in December may be too aggressive for many of the FOMC voters who favour gradual tightening, his comments keep alive the prospect that the Fed needs to hike three more times.”

Markets are now overwhelmingly expecting the Fed to raise rates in December.

A standard 25-basis-point increase remains the base case, but traders are also attaching a meaningful probability to a larger 50-basis-point move.

Dallas Fed President Lorie Logan has also argued that policymakers may need to move more quickly, while Kansas City Fed President Jeffrey Schmid described current policy as relatively accommodative.

ING added; “Given what could be an accelerating US labour market, core inflation well above target and a Fed ready to pull the trigger again, we expect the dollar to stay strong and explore the top end of trading ranges over the coming weeks.”

Strong UK Growth Fails to Halt Sterling Losses

The latest UK growth figures offered Sterling only limited support.

UK GDP expanded by 0.7% during the third quarter, matching expectations and recording the strongest quarterly increase in two-and-a-half years.

The figures reinforced the Bank of England's decision to raise interest rates last week and kept expectations of another increase in December alive.

Markets currently assign around a 75% probability to another BoE rate hike next month.

Nevertheless, the relative US rate outlook has dominated GBP/USD trading, particularly as investors increasingly consider the possibility that the Federal Reserve could tighten more aggressively than other major central banks.

MUFG has highlighted energy prices as another potential catalyst for a larger Fed move.

The bank commented; “A strong print plus a rebound in crude oil after the recent sharp drop would be one scenario of a possible more aggressive hike.”

It added; “It’s still more a risk than a core view but it would alter the current balanced expectations in the markets across key central banks and shift rate hike expectations much more in favour of the dollar.”

For GBP/USD, the 1.3250 area is now the immediate support level.

A sustained break lower would expose the 1.3200 area, followed by the 2026 low around 1.3140.

On the upside, Sterling would need to recover above 1.3350 initially to ease the immediate bearish pressure.

For now, the combination of persistent US inflation, hawkish Fed rhetoric and elevated short-term Treasury yields leaves the Dollar firmly in control.

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TAGS: Pound Dollar Forecasts