GBP/USD rose to 1.3237 on Friday. Following a rapid decline, the pound has entered a consolidation phase, although the main external drivers remain a strong US dollar and a renewed rise in bond yields amid inflation risks.
The focus remains on Bank of England policy. Markets put the probability of a rate hike at the November meeting at over 80% and are effectively pricing in two 25-basis-point hikes by February. High energy prices and concerns that inflationary pressures in the UK could prove more persistent are reinforcing these expectations. MPC member Megan Greene also warned that the Bank of England should not rely solely on high bond yields as a means of curbing inflation.
During his speech in Istanbul, Andrew Bailey focused less on the next rate decision and more on financial stability and fiscal policy. He stressed the need for a credible and predictable fiscal strategy amid soaring borrowing costs. UK government bond yields are near multi-year highs, increasing pressure on the budget and making the pound more sensitive to any signs of deteriorating fiscal discipline.
As a result, the fundamental backdrop for sterling remains mixed. Expectations of further Bank of England tightening support the currency, but a strong US dollar, elevated global yields and rising UK fiscal risks are limiting GBP/USD’s upside. In the short term, the balance will depend on whether expectations of a BoE rate hike can outweigh pressure from the US dollar.
Technical Analysis
On the H4 chart, GBP/USD remains in the downtrend that developed after the upward correction ended. The pair attempted to recover towards resistance at 1.3250 but failed to establish a foothold above it. The current structure suggests that the corrective move may be nearing completion, with the main downward move poised to resume.
In today’s trading session, the pair is expected to decline towards the nearest support at 1.3185. A confirmed break below this level would set up a third Elliott wave, followed by a move towards 1.3118 and 1.3108. The MACD indicator provides further confirmation of the bearish scenario and remains in negative territory. Despite the local recovery in the histogram, the indicator’s position does not yet signal a full reversal of the medium-term trend.
On the H1 chart, GBP/USD appears to be in the final stage of its upward correction around 1.3250. This resistance coincides with the descending trend line, increasing the likelihood of renewed selling. The Stochastic oscillator has turned down from elevated levels, signalling weakening buying momentum.
The main scenario remains a decline towards 1.3180, followed by a further move towards 1.3104. Intermediate levels are 1.3201 and 1.3118. At the same time, a return above 1.3250 would weaken the current bearish scenario and open the way for a retest of resistance at 1.3303.
Conclusion GBP/USD has steadied after a sharp decline, although the outlook remains mixed as the pound contends with a strong US dollar, elevated bond yields and rising UK fiscal risks. Markets continue to price in further Bank of England tightening, with the probability of a November rate hike above 80% and two 25-basis-point hikes effectively priced in by February, supported by persistent inflation concerns. However, Andrew Bailey’s focus on fiscal sustainability and financial stability, rather than the next rate decision, highlights the broader challenges facing the UK economy. Technically, the pair remains bearish below 1.3250, with a decline towards 1.3185 and potentially 1.3104 if support breaks. A recovery above 1.3250 would ease pressure but would not alter the broader downtrend, with 1.3303 as the next key resistance level.
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The Pound-Dollar rate could rebound if US consumer confidence weakens, although persistent risk aversion may keep the safe-haven Dollar supported. The Pound US Dollar (GBP/USD) exchange rate slipped to a six-day low on Thursday before bouncing back as volatile bond markets impacted the pairing.
At the time of writing, GBP/USD was trading at $1.3226, up marginally on the day.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.3229 (+0.12%)
Euro to Dollar (EUR/USD): 1.121178 (+0.10%)
Dollar to Yen (USD/JPY): 157.87288 (-0.14%)
DAILY RECAP:
The Pound (GBP) struggled to establish a clear direction on Thursday, with a quiet UK economic calendar leaving Sterling vulnerable to broader market movements.
The Pound moved erratically as UK gilt yields climbed to multi-year highs before easing back from their peaks. The initial jump in borrowing costs unsettled GBP, as higher government financing costs added to the challenges facing the Treasury ahead of the Autumn Budget.
However, the subsequent retreat in gilt yields helped calm some of those concerns, allowing the Pound to recover its earlier losses.
Meanwhile, the US Dollar (USD) was also mixed on Thursday as a shifting market mood left USD without a clear directional bias.
The currency initially firmed amid a deterioration in market sentiment. Risk appetite took a hit as oil prices climbed again following recent attacks on oil tankers in the Strait of Hormuz. At the same time, energy companies in the US shut down some offshore oil and gas platforms in the Gulf of Mexico as an approaching hurricane raised operational risks.
Expectations for higher interest rates around the world added to the pressure on sentiment, while reports that some major tech companies are seeking to raise billions of Dollars through debt also unsettled markets.
However, the market mood improved slightly as the session went on, prompting USD to relinquish its gains.
Near-Term GBP/USD Forecast: US Consumer Confidence in Focus Looking forward, the key data release on Friday will be the latest US consumer sentiment index from the University of Michigan.
Markets expect US household morale to have deteriorated to 47.6 in October, which would be its third consecutive decline and its weakest reading since May. If the data prints as forecast, the ‘Greenback’ may face headwinds.
Meanwhile, market risk appetite will likely continue to play a part in the safe-haven US Dollar’s direction. If investors remain risk averse, the ‘Greenback’ could attract support.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The American currency is moving higher as traders focus on escalation in the Middle East.
U.S. Dollar Stays Close To Yearly Highs
DXY 081026 4h Chart U.S. Dollar Index gains some ground as traders focus on the Initial Jobless Claims report. The report indicated that 197,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 200,000. The previous report was revised from 197,000 to 199,000. The report indicated that the job market remained in decent shape.
U.S. Dollar Index continues its attempts to settle above the resistance level at 102.35 – 102.50. In case U.S. Dollar Index manages to settle above the 102.50 level, it will head towards the next resistance, which is located in the 103.15 – 103.30 range.
EUR/USD Remains Under Pressure
EUR/USD 081026 4h Chart EUR/USD moved lower as traders reacted to Germany’s Exports report. The report showed that Germany’s Exports decreased by -0.8% month-over-month in August, compared to analyst forecast of +0.8%.
EUR/USD remains stuck near the support level at 1.1175 – 1.1190. If EUR/USD declines below the 1.1175 level, it will move towards the next support level, which is located in the 1.1075 – 1.1090 range. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in the near term.
GBP/USD Attempts To Settle Below 1.3200
GBP/USD 081026 4h Chart GBP/USD pulled back from session highs as traders focused on the strong rally in the oil markets. Oil prices gained 4% amid worries about escalation in the Middle East. I’d note that FedWatch Tool shows that the probability of a rate hike at the Fed meeting in October stays below 20% despite rising oil prices.
If GBP/USD manages to settle above the 50 MA at 1.3231, it will head towards the nearest resistance level at 1.3285 – 1.3300. On the support side, a move below the 1.3200 level will push GBP/USD towards the support at 1.3150 – 1.3165. In case GBP/USD declines below 1.3150, it will move towards the next support at 1.3030 – 1.3045.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts
USD/CAD Is Stuck Near The 1.4250 Level
USD/CAD 081026 4h Chart USD/CAD is swinging between gains and losses near the resistance level at 1.4235 – 1.4250. Other commodity-related currencies are losing some ground in today’s trading session.
If USD/CAD stays above the 1.4250 level, it will head towards the next resistance, which is located in the 1.4350 – 1.4365 range. On the support side, USD/CAD needs to settle below the 50 MA at 1.4229 to have a chance to gain downside momentum in the near term. In this case, USD/CAD will head towards the support level at 1.4135 – 1.4150.
USD/JPY Tests Key Resistance Level
USD/JPY 081026 4h Chart USD/JPY continues its attempts to settle above the resistance level at 158.00 – 158.50. The yield of 2-year Treasuries climbed towards the 4.80% level, providing some support to USD/JPY. Longer-term yields moved lower as bond traders have started to buy the dip.
A successful test of the resistance at 158.00 – 158.50 will push USD/JPY towards the next resistance at 160.00 – 160.50. The key question is whether BoJ is ready to intervene in case USD/JPY tests the psychologically important 160.00 level.
On the support side, a move below the 50 MA at 157.80 will push USD/JPY towards the 157.00 level. If USD/JPY manages to settle below 157.00, it will head towards the support level at 155.00 – 155.50.
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The Pound-Dollar could rebound if Bank of England policymakers turn more hawkish, while softer US jobless claims may limit support for the Dollar. The Pound US Dollar (GBP/USD) exchange rate retreated in mid-week trade as a bearish market mood underpinned demand for safe-haven assets like the 'Greenback'.
At the time of writing, GBP/USD was trading at around $1.3227. Down roughly 0.4% from Wednesday’s opening levels.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.320999 (-0.43%)
Euro to Dollar (EUR/USD): 1.119145 (-0.55%)
Dollar to Yen (USD/JPY): 158.08577 (-0.14%)
DAILY RECAP:
The US Dollar (USD) caught fresh bids on Wednesday as a more cautious mood underpinned demand for the safe-haven currency.
Sentiment deteriorated amid a fresh rise in oil prices, with Brent crude climbing back above $100 a barrel amid renewed concerns over global energy supplies following escalating tensions in the Middle East and a storm threatening US production.
Investors also erred on the side of caution as they awaited the publication of the minutes from the Federal Reserve's latest policy meeting.
The minutes could offer important insight into the debate among policymakers over the future path of interest rates, particularly given the more cautious tone adopted by several officials following recent weaker-than-expected inflation and employment data.
Any indication that policymakers remain concerned about persistent price pressures could revive expectations for further tightening and provide additional support for USD.
The Pound (GBP) was subdued on Wednesday as a lull in notable UK economic data left the currency exposed to trends in the UK bond market.
A gentle upward drift in sovereign borrowing costs added a modest headwind for Sterling. Escalating gilt yields revived concerns over the UK's strained public balance sheet, threatening to shrink Chancellor John Healey's already tight fiscal buffer just weeks before the Autumn Budget.
Even so, deeper losses were held in check as GBP investors continued to price in an increased likelihood of the Bank of England (BoE) lifting interest rates at its November meeting.
Near-Term GBP/USD Forecast: Trump-Xi Meeting in the Spotlight As we head into the second half of the week, we are likely to see the Pound to US Dollar (GBP/USD) exchange rate take direction from a series of speeches by BoE policymakers
The lineup features Monetary Policy Committee (MPC) members Megan Greene and Huw Pill -both of whom broke ranks to vote for a 25-basis-point rate increase last month - alongside Governor Andrew Bailey.
Should Bailey align his rhetoric with the hawkish camp and warn that persistent price pressures warrant a hike next month, Sterling is likely to rally.
Meanwhile, the latest initial jobless claims data from the US could apply some modest pressure to the US Dollar on Thursday if unemployment claims ticked higher last week.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
GBP/USD technical analysis shows the British pound holding a sideways range since November 2025 as the U.S. dollar index hits fresh 2026 highs.
Razan Hilal, StoneX Media Market Analyst, walks through the weekly and daily GBP/USD charts and the scenarios a range exit opens. Daily RSI readings on GBP/USD and EUR/USD are rebounding from oversold levels last seen in November 2025 and 2015 respectively, as the U.S. dollar index sits at overbought daily conditions last seen in 2023.
Fibonacci extensions map staged resistance up to the top of the British pound's consolidation, while a sustained breakdown below support opens a path toward the November 2025 lows.
This content was created by an affiliate of FOREX.com and represents the views and opinions of the author/speakers, not the views and opinions of Forex.com, StoneX Group Inc., or its subsidiaries. The content has not been independently reviewed by Forex.com.
I cover this chart every week in my Markets in Focus webinar
The Pound-Dollar rate could come under pressure if Fed minutes reinforce December hike expectations, while caution ahead of BoE speeches may cap Sterling. The Pound US Dollar (GBP/USD) exchange rate drifted higher on Tuesday as a more sanguine market mood limited the appeal of the 'Greenback'.
At the time of writing, GBP/USD was trading at around $1.3239. A modest rise from Tuesday's opening levels.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.327369 (+0.41%)
Euro to Dollar (EUR/USD): 1.12567 (+0.35%)
Dollar to Yen (USD/JPY): 158.15203 (+0.12%)
DAILY RECAP:
The US Dollar (USD) edged lower on Tuesday as an improvement in global risk appetite reduced demand for the traditional safe-haven currency.
A rally in equities, led by a tech-driven advance on Wall Street, helped encourage investors back towards riskier assets, while a pullback in oil prices provided some additional relief after elevated energy costs had contributed to recent market uncertainty.
The softer tone for the ‘greenback’ came despite the currency remaining close to multi-month highs. The US Dollar Index was hovering around 102.2 after gaining almost 1% last week, while elevated Treasury yields continued to provide a degree of underlying support for USD.
The Pound (GBP) traded in a narrow range on Tuesday morning ahead of a scheduled speech by Bank of England (BoE) policymaker Catherine Mann.
Mann was among a trio of policymakers who backed an immediate quarter-point increase at the central bank's September meeting.
GBP Investors will be watching closely to see whether the Monetary Policy Committee's (MPC) most prominent hawk will double down on the case for higher interest rates, with Sterling poised to rise if she signals support for a rate hike at the bank's next meeting in November.
Near-Term GBP/USD Forecast: Hawkish FOMC Minutes to Support the 'Greenback'? Looking ahead to Wednesday, the primary catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate will be the publication of the minutes from the Federal Reserve's September policy meeting.
USD investors will look to the minutes to better gauge the appetite within the bank for further interest rate hikes.
Barring an exceptionally hawkish tilt, they are unlikely to revive expectations for an October hike, but if they strengthen expectations that monetary policy may be tightened again in December the minutes may still prove positive for Sterling.
Meanwhile, the upside potential for Sterling in mid-week trade may be limited as traders keep their powder dry ahead of a packed slate of BoE appearances on Thursday, headlined by Governor Andrew Bailey.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
GBPUSD currency pair recently reversed up from the support zone between the key support level 1.3185 (which stopped wave (A) at the end of March and wave (C) at the end of June) and the lower daily Bollinger Band.
The upward reversal from this support zone completed the sharp downward ABC correction (2) from the end of August.
Given the strength of the support level 1.3185 and the oversold daily Stochastic oscillator, GBPUSD currency pair can be expected to rise further toward the next resistance level 1.3300 – former minor reversal high from the end of last month.
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US Dollar Talking Points:
This was a wide-ranging webinar looking at several macro items, with price action as a center point.
The US Dollar is coming off of overbought conditions on the daily and EUR/USD remains oversold while testing a major spot of long-term interest.
Also looked at in this session: GBP/USD, USD/JPY, USD/CAD, Gold, S&P 500, Nasdaq 100 and Treasuries.
As we go into Q4 the wall of worry is high. Treasury yields have pushed up to their highest levels since the Financial Collapse and with the trove of oncoming debt coming due the onslaught of supply is unlikely to help that theme. These higher borrowing costs make for a more unfriendly backdrop for both corporates and the US government, but, in and of itself, that’s not necessarily a deal killer. The continued bullish price action in equities illustrates that.
I looked into this for the Q4 forecasts, and the video below highlights that.
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USD
The US Dollar is already at a fresh yearly high and while USD/JPY was the major driver before, now, it’s EUR/USD. As similar debt problems have engulfed European sovereign debt markets, there’s the legitimate concern over European fragility. But, for both the US and Europe it’s in best interests for calm particularly in currency markets.
For the USD, prices are testing a major level at 101.80. As of this webinar, it was short-term support. But, chasing the move is challenging just given how stretched RSI has become, and also taken with a recent illustration of divergence given yesterday’s higher-high on price and lower-high via RSI.
For USD-strength: USD/JPY remains the most compelling market, in my opinion. For USD-weakness, GBP/USD stands out as most attractive with EUR/USD presenting a possible case, as well.
US Dollar Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
EUR/USD
A central theme of this webinar was ‘capitulation,’ and I discussed that in-depth regarding the S&P 500, gold, EUR/USD and USD/CAD. For EUR/USD, the week opened with a violent move lower as a major level was tested at 1.1212, which is the golden ratio of the lifetime move in the pair.
So far, that’s led to bounce, which I’ll look at in greater detail below.
EUR/USD Monthly Chart
Chart prepared by James Stanley; data derived from Tradingview
EUR/USD Daily
From the daily chart we can see last week’s reading where RSI closed below 20, which is rare. This was the lowest daily close for RSI since 2015, right after a massive sell-off and it was after that prior reading when price began to bounce.
RSI is not predictive, and this doesn’t have to mean that a low is in place. But it does provide for context that chasing the move lower is a challenge when it’s already so deep into the sell-off. And combined with the possibility of support above, traders can use shorter-terms to try to build the bullish case for the pair.
EUR/USD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
GBP/USD
I’ve been tracking Cable as more attractive for USD-weakness and as illustration of that RSI has already pushed out of oversold territory. And more recently, as EUR/USD set a fresh yearly low yesterday, GBP/USD was already setting up higher-lows and the bullish move has better development on shorter-terms at this point.
From the daily, we can see another big zone being tested and for those looking for USD-weakness, this can remain as a more compelling option, at this point.
GBP/USD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/JPY
While USD/JPY remains a massive component of USD-strength, more recently, it’s been lagging behind as the DXY rally has been driven by the meltdown in the Euro.
But – for USD-strength, I still think USD/JPY is the more attractive backdrop from shorter-terms, as the still bullish structure has continued to find buyers on pullbacks such as the six consecutive days of support tests at the key zone of 156.68-157.22.
I wrote about the pair yesterday and my view is largely the same as price has only moved incrementally higher since.
USD/JPY Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
USD/CAD
For much of the USD rally the complication with USD/JPY was that intervention threat, which was especially high when the pair was at fresh highs. USD/CAD, however, has been in the midst of an aggressive uptrend and this is why it was one of my more preferred venues for USD-strength.
The challenge now is the tide may soon be shifting as the overbought trend has started to show turbulence.
USD/CAD Daily Chart
Chart prepared by James Stanley; data derived from Tradingview
Gold
The webinar began with gold and that remains a hot button for me. At this point there’s possibility of a low but it’s still very early stage, and I used this as a central point for that concept of capitulation.
Big picture, as discussed in the macro portion towards the end, I think government reliance on debt keeps gold as an attractive accumulation venue, bigger picture, and on a more near-term basis that draws attention to the $4k level that saw considerable buying interest in June and July, even as the fundamental backdrop should have darkened for the metal.
Gold Daily Price Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Market Analyst, Global Macro
A stronger British Pound against the US Dollar features in BofA's forecasts, with GBP/USD reaching 1.37 by end-2026 despite UK policy uncertainty. Foreign currency strategists at Bank of America see the Pound Sterling recovering against the US Dollar by year-end, but want greater clarity on UK policy before taking a more positive near-term view.
Its recent exchange rate forecasts/predictions show GBP/USD at 1.37 at end-2026, 1.45 at end-2027 and 1.47 at end-2028.
The Pound to Dollar exchange rate traded near $1.3209 on Tuesday morning, down 0.08%, after slipping 0.15% on Monday.
That leaves BofA's year-end forecast approximately 3.7% above the current rate, following September's 2.10% decline.
"Elsewhere, we maintain a constructive medium-term view on GBP but prefer to await greater clarity on UK policies."
Image: Pound to Dollar exchange rate one-month chart Pound Sterling: BofA sees improvements beyond interest rates The bank argues that Sterling has become less vulnerable to fiscal concerns than other major currencies, despite the approaching Budget.
It identifies overseas investment as one source of support:
"Sticky FDI inflows have provided a meaningful fillip to the UK's balance of payments"
FDI means foreign direct investment, which can provide longer-lasting funding than short-term portfolio flows.
BofA also says gilts have held up better than other bond markets, helped by the Bank of England's overhaul of its bond-sales programme.
Closer relations with Europe form another part of its argument:
"Finally, strengthening EU-UK ties now appears a more focused objective for the UK government. While serious negotiations are unlikely near-term, the prospect of all options being on the table is a medium-term positive for GBP. We stay constructive."
US Dollar (USD) strength remains an immediate obstacle BofA's near-term Dollar analysis still sees scope for further gains, making its Sterling forecast a recovery call rather than an endorsement of current momentum.
Monday's upward revision to the UK services PMI failed to prevent GBP/USD ending the day lower.
Image: GBP/USD 48hr chart Our reading is that stronger domestic data alone may be insufficient: BofA's case also depends on confidence in UK policy and sustained investment inflows.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Dollar could strengthen if dovish Fed remarks further reduce rate hike expectations, while improving risk appetite may also support Sterling. The Pound US Dollar (GBP/USD) exchange rate fluctuated on Monday amid a shifting market mood.
At the time of writing, GBP/USD was trading at $1.3226, down marginally on the day but up from an earlier low of $1.3192.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.320765 (-0.24%)
Euro to Dollar (EUR/USD): 1.120491 (-0.42%)
Dollar to Yen (USD/JPY): 158.05779 (+0.13%)
DAILY RECAP:
The US Dollar (USD) initially strengthened as markets opened at the start of the week, as a risk-off mood boosted demand for the safe-haven currency.
Sentiment soured amid the ongoing crisis in the Middle East, with shipping traffic in the Strait of Hormuz virtually grinding to a halt on Monday following attacks in the vicinity over the weekend.
However, the mood improved as the session unfolded. Markets took encouragement from the recent sharp repricing in Federal Reserve interest rate bets, following Friday’s weak payrolls data.
This pullback in Fed bets also weighed directly on the US Dollar, seeing it quickly trim its initial gains.
Meanwhile, the increasingly risk-sensitive Pound (GBP) slipped against the US Dollar during the early hours of Monday morning amid the risk-off market mood.
Sterling was able to regain lost ground later on, however, thanks in part to the UK’s final services PMI. September’s survey was revised slightly higher, printing at 52.1 versus the preliminary 51.7. Although this was still a slowdown from August’s 52.5, the better-than-expected figures aided GBP.
Near-Term GBP/USD Forecast: Fed Speeches to Dent the Dollar? Looking forward, two Federal Reserve officials are due to speak on Tuesday – Michelle Bowman and John Williams. Both policymakers are considered to be on the dovish end of the spectrum, so their comments could dent USD, if they suggest that they won’t support an interest rate hike this month.
Meanwhile, the data calendar for GBP is quiet, which may limit movement in the Pound.
Market risk appetite may also influence the GBP/USD exchange rate. A risk-off mood would likely support the safe-haven Dollar, while an improvement in market sentiment could underpin the increasingly risk-sensitive Pound. Any shifts in risk appetite could also drive fresh volatility.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
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The Pound-Dollar rate could remain volatile as Fed minutes test rate expectations, while Sterling lacks major domestic catalysts this week. Trade in the Pound US Dollar (GBP/USD) exchange rate was volatile last week amid shifting market sentiment and a dramatic repricing of Federal Reserve interest rate expectations.
At the time of writing, GBP/USD was trading at around $1.3226. Almost unchanged from the start of last week’s session.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.324335 (+0.03%)
Euro to Dollar (EUR/USD): 1.126089 (+0.08%)
Dollar to Yen (USD/JPY): 157.77474 (-0.05%)
DAILY RECAP:
Trade in the US Dollar (USD) was a little more mixed last week, with the currency's recent bullish run being tested by a repricing of Federal Reserve rate hike bets.
Supporting the safe-haven currency were elevated energy prices and ongoing geopolitical uncertainty as US President Donald Trump rejected a proposal from Iran to reopen the Strait of Hormuz.
But the US Dollar struggled to consolidate these gains as the probability of the Fed delivering another 25-basis-point hike in October fell from around 70% to roughly 37% during the course of the session, following dovish remarks from New York Fed President John Williams, and a weaker-than-expected core PCE price index.
Closing out the week was the publication of the latest US non-farm payroll report, with the US Dollar facing more notable pressure as much weaker-than-expected employment growth was seen as the final nail in the coffin for an October hike.
While the Pound (GBP) wobbled against the US Dollar, it accelerated against the majority of its other peers last week as it was underpinned by a propelled by an encouraging upgrade to domestic growth as well as a potential radical rethink of the UK's relationship with the EU.
Initial support followed a revision to UK second quarter GDP, which was revised up from 0.4% to 0.5% by the Office for National Statistics (ONS) and bolstered confidence that the Bank of England (BoE) will hike interest rates by the end of the year.
These gains were then built on by Prime Minister Andy Burnham, who branded Brexit as a failure and suggested the UK needed to be more ambitious in its relationship with the EU.
In outlining potential paths for a comprehensive diplomatic reset, Burnham suggested that everything remained on the table, explicitly floating the prospect of the UK eventually seeking full re-entry into the bloc.
Near-Term GBP/USD Forecast: Hawkish Fed Minutes May Revive Fed Rate Hike Bets Turning to this week, a key catalyst of movement for the Pound to US Dollar exchange rate will likely be the publication of the minutes from the Fed's policy meeting in September.
USD investors will scour the minutes as the seek to gauge policymakers' appetite for further tightening, with the 'Greenback' likely to surge if they revive bets for a rate hike later in the month.
Meanwhile, with little in the way of UK macroeconomic data, Sterling will have few home-grown catalysts to work with, leaving its trajectory largely at the mercy of global risk flows.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
GBP/USD starts the new week of October at 1.3237. The pound is seizing every opportunity to rebound from three-month lows after a weak US labour market report put pressure on the dollar.
The US economy added just 29,000 jobs in September, compared with expectations of 90,000. This has reinforced expectations that the Federal Reserve could leave rates unchanged in October, with the probability of a move in December now appearing higher.
In the UK, markets are now pricing in approximately 30 basis points of Bank of England policy tightening before year-end and around 90 basis points by the end of 2027. Several Bank of England officials, including Andrew Bailey, have recently signalled greater openness to the possibility of raising rates if high energy prices persist, reflecting concerns that inflation could remain above target for longer.
Additional support for the pound came from Prime Minister Andy Burnham’s comments in favour of closer UK ties with the EU ahead of a summit expected around 20 November. The possibility of revisiting EU membership around the next general election is also being discussed.
Technical Analysis
On the H4 GBP/USD chart, the pair maintains a steady downward structure. Following a corrective move towards resistance at 1.3303, the market resumed its decline and returned to the 1.3201 area. The price remains within the descending channel, while the sequence of local highs confirms continued selling pressure.
The main scenario envisages a continuation of the third downward move, with an initial target at 1.3180. A break and consolidation below this level could open the way for a decline towards 1.3108 and subsequently 1.3044. The 1.3303 level remains key resistance and the invalidation point for the current bearish scenario.
The MACD indicator supports the bearish scenario. It remains in negative territory, while its structure continues to point downwards. At the same time, the shrinking negative histogram suggests that a local correction is possible before another downward move.
On the H1 GBP/USD chart, the market completed its corrective rise around 1.3252 and developed renewed downward momentum. The nearest support is at 1.3185. A break below this level could open the way for a decline towards 1.3108 and subsequently 1.3044. The Stochastic oscillator has fallen well below 50 and is approaching the oversold zone, confirming strong short-term selling momentum. A technical pause or slight correction is therefore possible around 1.3185. However, while the price remains below 1.3252 and particularly below 1.3303, the main direction for the upcoming trading session remains downwards. A return above 1.3252 would temporarily ease selling pressure but would not alter the overall bearish structure on H1.
Conclusion GBP/USD has edged higher as the pound attempts to recover from three-month lows, supported by a weak US jobs report that has reduced expectations of an October Fed rate hike. Markets now see a higher probability of a move in December.
In the UK, expectations of BoE tightening have increased, with policymakers including Andrew Bailey signalling greater openness to rate hikes if high energy prices persist, amid concerns that inflation could remain above target for longer. Political developments, including Prime Minister Andy Burnham’s push for closer ties with the EU, have also supported the pound.
From a technical perspective, GBP/USD remains bearish below 1.3252 and 1.3303. The main H4 scenario envisages a decline towards 1.3180, with a break and consolidation below this level potentially opening the way towards 1.3108 and subsequently 1.3044. A return above 1.3252 would ease short-term selling pressure but would not alter the broader bearish structure, while 1.3303 remains the invalidation point for the current bearish scenario.
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Weak US payrolls lift GBP/USD towards 1.3260 as ING questions further Fed tightening, while still expecting a December hike. The US Dollar fell against Pound Sterling, the Euro and the Australian Dollar on Friday after September's jobs report weakened the case for another Federal Reserve rate increase this month.
Latest-Exchange Rates:
Euro to Dollar (EUR/USD): 1.127837 (+0.27%)
Pound to Dollar (GBP/USD): 1.325093 (+0.40%)
Dollar to Yen (USD/JPY): 157.66629 (-0.17%)
US employers added just 29,000 jobs, against the 90,000 consensus cited by ING, while revisions removed 60,000 jobs from the previous two months.
Unemployment rose to 4.2% from 4.1% and annual wage growth slowed to 3%, leaving ING arguing that investors still expect too much monetary tightening.
At the time of writing, the Pound to Dollar exchange rate (GBP/USD) was around 1.3256, up approximately 0.43% on the day, while EUR/USD traded near 1.1282, up 0.30%.
The Australian Dollar gained roughly 0.64% to US$0.6973 and the New Zealand Dollar rose 0.46% to US$0.5627.
Canada was an exception to the broader daily move, with USD/CAD still marginally higher at 1.4227 despite retreating after the release.
Image: US Dollar fx reaction vs major currencies after US NFP report ING sees less urgency to raise rates ING's chief international economist James Knightley says the report reinforces recent signals from the Fed leadership that policymakers can take more time before acting again.
"As such, the Fed leadership is clearly leaning in the direction of an October hold, meaning it will require a hot September CPI print (due 14 October) to make the meeting interesting. December remains our call on the next Fed hike."
The immediate market response was consistent with that assessment, with two-year Treasury yields falling to around 4.72% from 4.77% before the release.
Lower US yields reduce one source of support for the Dollar, although ING's December forecast leaves scope for borrowing costs to rise again before year-end.
The official employment figures also showed monthly wage growth of just 0.1%.
Knightley sees little evidence that competition for staff is generating additional inflation pressure.
"There are now similar numbers of unemployed people and job vacancies. In early 2022, there were two job vacancies for every unemployed American."
He adds: "Unsurprisingly, this demand-supply swing lower is depressing wage growth, with the low quits rate suggesting further downside risks to wage growth relative to the current, already low, 3% rate."
A weaker outcome than banks had anticipated The release undershot the expectations discussed in our four-bank US payrolls preview.
Crédit Agricole had forecast 90,000 jobs and 0.2% monthly wage growth, although its unemployment forecast of 4.2% proved correct.
JPMorgan's market intelligence team had highlighted upside hiring risks after ADP, a possibility the headline payroll figure did not bear out.
Those were pre-release assessments, while ING's new analysis questions how much further the Fed needs to go.
"This suggests there is no inflation threat coming from the jobs market and reinforces our view that the market pricing of 3-4 Fed rate hikes looks too aggressive."
The report still contained pockets of strength, including a fourth consecutive monthly rise in manufacturing employment.
The increase in unemployment also reflected more people looking for work.
"It can be a little choppy, and we saw a 485,000 increase in the labour force last month, lifting the participation rate to 61.8% from 61.6%."
Our reading is that Friday's figures weaken the argument for rapid successive hikes without settling the inflation debate.
The 14 October CPI release will test whether price pressures elsewhere in the economy are strong enough to override the cooler hiring and wage figures.
Pound-Dollar could remain under pressure if US payrolls beat forecasts, while a weaker jobs report may trigger a sharp pullback in the Dollar. The Pound US Dollar (GBP/USD) exchange rate fell on Thursday as geopolitical tensions soured the market mood.
At the time of writing, GBP/USD was trading at $1.3212, down almost 0.4% on the day.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.324686 (-0.13%)
Euro to Dollar (EUR/USD): 1.130841 (-0.17%)
Dollar to Yen (USD/JPY): 157.92549 (+0.23%)
DAILY RECAP:
The US Dollar (USD) rose on Thursday as a risk-off market mood supported the safe-haven currency.
Investors were anxious amid ongoing geopolitical tensions and a fresh rise in oil prices, following a Ukrainian attack on a Russian oil facility and threats from US President Donald Trump to ‘blow up’ Iran if a favourable deal isn’t reached.
The ‘Greenback’ managed to sustain its upside into the afternoon, despite the latest ISM manufacturing PMI printing below forecasts. The survey came in at 54.5 in September, down from 54.6 and below expectations for 55.
Still, the release pointed to a decent expansion in US factory activity last month, despite the slowdown.
The Pound (GBP) struggled to establish a clear direction on Thursday, with a quiet UK data calendar leaving Sterling short of fresh catalysts.
The only notable release was the UK’s final manufacturing PMI for September, which was revised slightly lower. The index registered 51.9, up from August’s 51.7 but just below the preliminary reading of 52.
The marginal revision left Sterling lacking support, while a gloomy mood put some pressure on the increasingly risk-sensitive currency.
Near-Term GBP/USD Forecast: US Payrolls in Focus Looking forward, the focus on Friday will be the latest US non-farm payrolls report.
The US economy is expected to have added 90,000 jobs in September, a sharp slowdown from August's 162,000 but a relatively decent figure by recent standards. As a result, it could offer USD modest support.
Steeper movement is likely if the payrolls report surprises markets. Another stronger-than-expected reading could propel the Dollar higher, while a weaker reading could see the ‘Greenback’ slump as markets adjust their bets on Federal Reserve interest rate hikes.
Meanwhile, UK data is thin on the ground, likely leaving Sterling to trade on wider market trends.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
GBP/USD has risen over 0.3% in the last four sessions, a marginal, but significant gain in a market dominated by strong US dollar fundamentals The British pound recently made a strong move against the US dollar, climbing over 0.3% in the last four sessions and briefly getting above 1.3300 for GBP/USD, a one-week high. This bounce comes after a sharp fall, dropping from nearly 1.36 in late August to around 1.3200-1.3210 by late September.
Market participants are now watching to see if this climb means a real shift in the trend or just a short break before prices fall again.
What Is Supporting GBP/USD Recovery? A few things are helping GBP/USD bounce back. For one, the US dollar is weaker. Federal Reserve official Williams, for example, hinted he’d only back one more 0.25% rate hike. That news quickly dropped the market’s expected chance of an October increase, going from about 70% to 45% in a single day.
Cooler US inflation numbers, especially the PCE figures, also helped calm expectations for a Fed hike in October.
Meanwhile, revised UK second-quarter Gross Domestic Product (GDP) data showed growth was stronger than first thought, rising to 0.5% instead of the earlier 0.4%.
This better growth figure has raised expectations of further hikes from Bank of England (BoE). Money markets now see an 80% or higher chance of a 25-basis-point rate increase at the BoE’s November 5th meeting, quite a jump from what was expected before.
Near-Term Risks Remain Even with these recent gains, technical and fundamental indicators suggest it’s wise to be careful, as big challenges are still out there. The Federal Reserve has already moved rates to 3.75%-4.00% and keeps hinting it’s prepared to tighten more if inflation doesn’t cool down. US 10-year yields, trading at levels not seen since 2007, continue to bolster the dollar.
Upcoming economic data like US non-farm payrolls and inflation reports could quickly revive expectations of an October Fed hike. That could easily wipe out sterling’s recent gains.
Higher oil prices, stemming from stalled talks on reopening the Strait of Hormuz, also make further Fed tightening seem more likely. This has boosted demand for the dollar as a safe haven. If those talks don’t succeed, oil prices might climb even higher, worsening inflation worries and likely strengthening the dollar.
Technically, the GBP/USD pair hasn’t held above 1.3300. While support near 1.3200 has held up so far, a clear break below that could send it dropping toward 1.3140 or maybe 1.3100. On the other hand, if it moves and holds above the 1.3350-1.3400 range, that’d build a stronger case for a bigger recovery.
How likely is a Bank of England rate increase in November?
Markets currently assign an 80% or higher probability to a 25-basis-point hike at the 5 November meeting following the GDP revision.
What’s the biggest risk to the pound gaining more ground?
The pound’s recent strength against the dollar could easily reverse. That would happen if a strong US jobs or inflation report makes a late-October Fed hike look very probable once more.
An increasing divergence between short-term and long-term interest rates has become more positive for the U.S. Dollar. Falling longer-term U.S. Treasury yields would help to alleviate the current high inflation and bond market pressures. However, U.S. treasuries have come under pressure due to increased government spending and borrowing. The U.S. Dollar Index reached its highest level in more than three months, on September 15.
Difficult conditions persist for the euro. Recent developments have witnessed a build up in inflation throughout the eurozone. As usual, the ECB is taking a dovish stance despite rising inflation, citing that wage inflation has not materially increased. The euro fell by the most since July 2022 in September.
British economic data showed that the UK economy grew by more than expected in the last quarter. However, tighter financial conditions are expected to dampen economic activity going forward. Markets expect interest rate hikes by the BOE in November and February.
The U.S. dollar is expected to appreciate against the euro and British pound. The Employment Situation Report, which is expected to show strong non-farm payroll growth, could increase market uncertainty ahead of the weekend.
U.S. Dollar Index Technical Analysis: DXY Holds 101.45 Breakout as 101.78 Becomes the Next Upside Test
Looking at RSI on the 2 hour time frame, it supports the overall bullish trend and momentum with values currently above 50. If the bullish trend remains, support would come in at 101.23 and 100.93. A break below 101.45 would negate the bullish case for DXY. If the trend line continues higher, subsequent resistance would come in at 101.78, with a break above that level possibly targeting 102.00.
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GBP/USD Technical Analysis: Sterling Slips Below 1.3250 as 1.3205 Support Comes Back Into Focus
EUR/USD Price Chart – Source: Tradingview The EUR/USD is currently at 1.1301 on the 2 hour chart. I see that the pair broke 1.1312 support. Below the support, I see no major support until 1.1283. Once that level is broken, then support is located at 1.1256, and 1.1230.
From the recent movement of EUR/USD, the pair has formed a series of lower highs and lower lows. Because of this, the overall trend is down. A break of 1.1283 changes the trend to up, and then 1.1312 is the first major resistance.
The first support I am watching is 1.1283. Expect 1.1256 below. Limit orders to buy are now filled at 1.1312, above which 1.1350 and 1.1373 become key levels.
RSI is near the 30 level and is in the bearish territory, signaling that further declines may be limited. I am bearish and expect downside to the 1.1312/50 area, which is reinforced by a lower trendline, and a bearish channel. A move above the 1.1373 area changes the near-term bias. I shall wait for a break below 1.1283 for another target at 1.1256.
The Pound-Dollar could extend gains if US manufacturing disappoints, although stronger factory activity may offer the Greenback some support. The Pound US Dollar (GBP/USD) exchange rate raced higher on Wednesday, amid a notable correction in the 'Greenback' following the latest US inflation data.
At the time of writing, GBP/USD was trading at around $1.3293. Up roughly 0.5% from Wednesday’s opening levels.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.323229 (-0.24%)
Euro to Dollar (EUR/USD): 1.130769 (-0.18%)
Dollar to Yen (USD/JPY): 158.2619 (+0.45%)
DAILY RECAP:
The US Dollar (USD) suffered a sizable selloff on Wednesday, as markets reacted to the latest core PCE price index.
The Federal Reserve's preferred indicator for inflation fell short of expectations in August, printing at 3% against the 3.3% forecast, while July's index was also revised down from 3.3% to 3%.
The data weigh heavily on USD exchange rates as it caused a notable repricing of Fed rate expectations, with CME's FedWatch tool suggesting he odds of an October hike fell to 37%, down from over 70% earlier in the week.
The lacklustre inflation data was enough to overshadow the latest US GDP figures, despite growth being revised notably higher in the second quarter.
The Pound (GBP) strengthened against the majority of its peers on Wednesday, after the UK’s own second-quarter GDP figures came in ahead of initial estimates.
Figures from the Office for National Statistics (ONS) showed quarterly economic growth was revised up to 0.5%, compared with the previous estimate of 0.4%.
The stronger-than-expected performance offered fresh encouragement to GBP investors, with evidence of greater economic resilience potentially strengthening expectations that the Bank of England (BoE) will finally restart its hiking cycle following its November policy meeting.
Near-Term GBP/USD Forecast: Robust US Manufacturing PMI to Lift the 'Greenback'? Looking ahead to Thursday's session, the next catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate will likely be the publication of the latest ISM manufacturing PMI.
If September's index points to further expansion in the US factory sector, it may offer fresh support to the US Dollar.
However, any movement in the US Dollar may ultimately be limited on Thursday as USD investors brace for Friday's more influential non-farm payroll data.
Meanwhile, with the UK economic calendar growing sparse in the second half of the week, Sterling may lack a strong domestic catalyst and trade largely in line with broader market trends.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Dollar rate could extend gains if US manufacturing disappoints, although stronger factory activity may offer the Greenback some support. The Pound US Dollar (GBP/USD) exchange rate raced higher on Wednesday, amid a notable correction in the 'Greenback' following the latest US inflation data.
At the time of writing, GBP/USD was trading at around $1.3293. Up roughly 0.5% from Wednesday’s opening levels.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.328455 (+0.41%)
Euro to Dollar (EUR/USD): 1.135765 (+0.15%)
Dollar to Yen (USD/JPY): 156.87825 (-0.34%)
DAILY RECAP:
The US Dollar (USD) suffered a sizable selloff on Wednesday, as markets reacted to the latest core PCE price index.
The Federal Reserve's preferred indicator for inflation fell short of expectations in August, printing at 3% against the 3.3% forecast, while July's index was also revised down from 3.3% to 3%.
The data weigh heavily on USD exchange rates as it caused a notable repricing of Fed rate expectations, with CME's FedWatch tool suggesting he odds of an October hike fell to 37%, down from over 70% earlier in the week.
The lacklustre inflation data was enough to overshadow the latest US GDP figures, despite growth being revised notably higher in the second quarter.
The Pound (GBP) strengthened against the majority of its peers on Wednesday, after the UK’s own second-quarter GDP figures came in ahead of initial estimates.
Figures from the Office for National Statistics (ONS) showed quarterly economic growth was revised up to 0.5%, compared with the previous estimate of 0.4%.
The stronger-than-expected performance offered fresh encouragement to GBP investors, with evidence of greater economic resilience potentially strengthening expectations that the Bank of England (BoE) will finally restart its hiking cycle following its November policy meeting.
Near-Term GBP/USD Forecast: Robust US Manufacturing PMI to Lift the 'Greenback'? Looking ahead to Thursday's session, the next catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate will likely be the publication of the latest ISM manufacturing PMI.
If September's index points to further expansion in the US factory sector, it may offer fresh support to the US Dollar.
However, any movement in the US Dollar may ultimately be limited on Thursday as USD investors brace for Friday's more influential non-farm payroll data.
Meanwhile, with the UK economic calendar growing sparse in the second half of the week, Sterling may lack a strong domestic catalyst and trade largely in line with broader market trends.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
GBP/USD fell to 1.3228 on Wednesday, with the pound remaining at three-month lows. Investors continue to favour the dollar amid growing expectations of a Federal Reserve rate hike as early as October, while the Bank of England is not expected to change policy until November.
High oil prices are also supporting the US dollar. Negotiations to resume full operations at the Strait of Hormuz have stalled, heightening inflation risks, strengthening expectations of further Fed tightening, and increasing demand for the US currency as a safe-haven asset.
In the UK, markets estimate the likelihood of a 25 basis point Bank of England rate hike in November at over 80%. By mid-2027, approximately four increases are already priced in. However, weak growth in the British economy during 2026 and early 2027 may limit the regulator’s ability to tighten aggressively.
Bank of England Deputy Governor Dave Ramsden stated that he would support further rate hikes if inflationary pressures persist. His stance aligns with recent warnings from Andrew Bailey.
Earlier this month, the MPC voted 6 to 3 to keep rates at 3.75%, while warning that inflation could climb to around 4%.
Technical Analysis
On the H4 chart, GBP/USD maintains a steady downward structure. Following the completion of the previous correction, the market formed another downward impulse and reached the 1.3202 area. The subsequent recovery was capped at 1.3232, which remains a local corrective leg within the broader bearish trend. The price remains below the downward dynamic resistance, and the sequence of lower highs confirms continued selling pressure. The nearest resistance is the 1.3232–1.3238 range. As long as the market holds below this zone, the baseline scenario remains a continuation of the decline towards 1.3175. After a possible interim correction, the next target is 1.3127, and if momentum strengthens, 1.3081. The MACD is positioned in negative territory. Despite the local shrinking of the negative histogram, the indicator’s position below zero supports the medium-term downward scenario.
On H1, the correction also remains limited. Following the decline, the market formed a recovery to 1.3236, but there was no consolidation above resistance. The current structure allows for the formation of another downward wave, initially towards 1.3202 and then to the key intraday support of 1.3175. The Stochastic oscillator has turned down from the upper part of its working range: the signal lines are below the 80 level and pointing towards the central 50 mark. This indicates a weakening of the local corrective impulse. Should selling pressure persist, the oscillator’s move towards the 20 region would correspond with the development of the main downward wave. Cancellation of the priority scenario would require a sustained consolidation of GBP/USD above 1.3238, followed by a move towards 1.3270.
Conclusion GBP/USD remains under pressure at three-month lows, with sellers firmly in control as the dollar benefits from October Fed rate hike expectations, elevated oil prices, and stalled Strait of Hormuz negotiations. While markets price in over an 80% chance of a November BoE hike, the UK’s weak growth outlook may limit the central bank’s ability to tighten aggressively. Deputy Governor Ramsden’s hawkish comments align with Bailey’s recent warnings, but the pound has yet to find meaningful support. Technically, the pair remains bearish below the 1.3232–1.3238 resistance zone, with a continuation of the decline towards 1.3175, 1.3127, and potentially 1.3081 likely in the near term. A sustained break above 1.3238 would be required to shift the short-term outlook.
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GBP/USD: Can Stronger UK Growth Offset the Dollar’s Advantage?
GBP/USD is rising modestly on Wednesday but remains close to its three-month low, having fallen more than 2% across September.
Today’s move higher comes after stronger-than-expected UK GDP data, as U.S. dollar bulls pause for breath.
Data from the Office for National Statistics showed that UK Q2 GDP was upgraded to 0.5% in the three months to June, better than the 0.4% growth seen in the first estimate. This follows growth of 0.6% in Q1.
The data confirms that the UK was the fastest-growing G7 economy in the first half of the year, as consumers continued to spend even as the Middle East conflict lifted oil prices and added to inflationary pressures.
The numbers come as a boost for the Labour Party as it holds its annual conference in Liverpool.
Despite solid GDP growth in Q1 and Q2, the outlook for the second half of the year is darkening, with pressures expected to build on businesses and households. Growth is expected to slow to 0.2% in Q3 and Q4 amid a fresh spike in living costs.
U.S. Yields and Fed Expectations Keep the Dollar in Focus
Meanwhile, the U.S. dollar is pulling back from the two-month high reached yesterday as Treasury yields retreat.
U.S. Treasury yields have pulled back from multi-year highs as oil prices fall to a three-week low, following dovish remarks from New York Fed President John Williams, who warned that the central bank did not need to rush its next move.
U.S. data was also weaker than expected, with Conference Board consumer confidence falling to its lowest level since May 2014, while job openings declined more than expected to 7.09 million.
October Fed rate hike expectations have pulled back from 70% to 40%. However, traders are still pricing in more than a 90% probability that the Fed will raise borrowing costs by the end of the year, which could limit any pullback in the U.S. dollar.
U.S. Inflation and Payrolls Could Decide the Next Move
Attention will now turn to U.S. core PCE, the Fed’s preferred gauge of inflation, which is expected to rise 0.3% month-on-month, up from 0.2%.
The data will be accompanied by final U.S. Q2 GDP data, along with more speeches from Federal Reserve officials. U.S. non-farm payrolls will be released on Friday.
Strong data and hawkish Fed officials could see October rate hike expectations rebound, lifting the U.S. dollar and pulling GBP/USD lower.
The key question for GBP/USD is whether stronger UK growth can offset the widening U.S.-UK yield and policy differential.
If U.S. inflation remains sticky and payrolls are stronger than expected, markets could price out the recent pullback in October rate hike expectations. Higher Treasury yields would then support the dollar and put renewed pressure on GBP/USD.
Conversely, weaker U.S. data combined with continued oil price declines could ease inflation concerns and reduce expectations of further Fed tightening. Lower Treasury yields would weaken the dollar and give GBP/USD more room to recover.
GBP/USD forecast - technical analysis
GBP/USD has broken below its rising channel as well as its 50- and 200-day EMAs before finding support around 1.3200. The pair has since recovered slightly and is consolidating around 1.3250, while the RSI has moved out of oversold territory.
The 50 EMA is also close to crossing below the 200 EMA, which would form a bearish death cross.
Sellers will look to break below the 1.3200 support zone to extend the decline towards 1.3100, followed by the psychological 1.3000 level.
On the upside, initial resistance is seen at 1.3275, this week’s high. A break above this level would expose 1.3350, the July 27 swing low, followed by horizontal resistance around 1.3500.
A sustained move above the 50- and 200-day EMAs would put buyers on a firmer footing and bring 1.3500 into focus.
Oil: Supply Recovery Challenges the Geopolitical Premium
Oil prices are drifting modestly higher as President Trump denies that he would be willing to ease sanctions on Iran. Still, gains are muted amid optimism surrounding a recovery in crude supply from the Middle East, which helped pull prices to a three-week low in the previous session.
While Brent is trading above $90 a barrel, the December contract is around $96. Meanwhile, WTI is hovering around $89.
Brent is on track to gain 14% in September, its largest monthly increase since July, while WTI is on track for a more modest 4% rise.
The spread between the two benchmarks is at its widest in four months as markets weigh plans in the U.S. to restrict diesel exports, which could create an oversupply in the U.S. market and lead refiners to produce less crude.
Meanwhile, the picture in the Middle East remains uncertain as Qatar continues its shuttle diplomacy between Tehran and Washington, hoping for a breakthrough.
Although Trump has said he is unwilling to give Iran sanctions relief unless there are concrete steps from Tehran on its nuclear programme, limiting the chances of a diplomatic solution, the impact on oil prices may be limited if crude supply continues to flow.
Crude exports from Middle Eastern producers rebounded in September to 16.32 million barrels per day, the highest since the Iran war began in February. Regional exports are now just 11% below pre-war levels.
That is a remarkable recovery for a region still in conflict. With oil flowing, concerns over supply have eased, putting pressure on prices.
Oil forecast technical analysis
Oil trades in an ascending channel dating back to early July. The price recently ran into resistance at $106.75 before rebounding lower and is currently testing the lower band of the rising channel and the 50 EMA around $89. The RSI is below 50.
Should sellers break below the $89 support zone and the 38.2% Fibonacci retracement of the $55 low to $120 high, sellers could gain traction towards the 200 EMA at $82.50 and the 61.8% Fibonacci retracement at $80. Below here, attention will turn towards $75, the August low.
Should the $89 level hold, buyers will need to rise above $95. The 38.2% Fibonacci retracement above here would bring $100, the psychological level, into focus, followed by $105, the 23.6% Fibonacci retracement.
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Pound-Dollar could remain under pressure if US inflation strengthens Fed hike expectations, while Sterling lacks a clear domestic catalyst. The Pound US Dollar (GBP/USD) exchange rate drifted lower on Tuesday as the market mood remained downbeat.
At the time of writing, GBP/USD was trading at around $1.3227. Down around 0.2% from Tuesday's opening levels.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.320952 (-0.33%)
Euro to Dollar (EUR/USD): 1.132881 (-0.39%)
Dollar to Yen (USD/JPY): 157.50041 (+0.09%)
DAILY RECAP:
The US Dollar (USD) firmed on Tuesday as elevated energy prices continued to underpin demand for safe-haven assets.
Brent crude remained well above $100 a barrel on Tuesday amid ongoing uncertainty surrounding efforts to end the US-Iran conflict and negotiations to reopen the Strait of Hormuz.
The 'Greenback' continued to be supported by hawkish Federal Reserve interest rate expectations, with investors pricing in a 72% chance of the US central bank delivering another 25bps rate hike in October.
However, the upside in USD remained relatively modest on Tuesday morning as investors awaited the publication of the latest JOLTS job opening data, a drop in which could temper Fed rate bets.
The Pound (GBP) traded without clear direction on Tuesday, drifting sideways against major peers as a barren domestic data calendar left investors short of concrete economic cues.
Adding to the subdued mood, market participants were hesitant to take large directional positions ahead of Prime Minister Andy Burnham’s keynote address at the Labour Party conference.
Speculation suggests that Burnham will address long-debated reforms to the pension triple lock, as well as outlining his stance on the UK rejoining the European Union, the latter potentially striking a constructive tone with currency traders.
Near-Term GBP/USD Forecast: Rising US Inflation to Boost the 'Greenback'? Looking ahead, the primary catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate on Wednesday is likely to be the publication of the core PCE price index.
The Federal Reserve's preferred inflation indicator is forecast to have climbed again in August, which will likely lift the 'Greenback' as it cements expectations for an October rate hike from the US central bank.
Over in the UK, finalised second-quarter GDP figures are scheduled for release on Wednesday, but unless the reading delivers a surprise revision, Sterling will likely take its cues from broader risk appetite across global markets.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Elevated U.S. inflation and frequent issuance of U.S. Treasuries have driven the 10-year U.S. Treasury note yield above 3.6% and put a lid on bonds, supporting the greenback. The U.S. Dollar is set for a strong month.
It is true that major rises in energy costs as a result of the conflict in Iran have hurt the euro recently. Along with rising geopolitical tensions, French bonds are once again far less attractive than their German counterparts, pushing yields up by 115 basis points. The euro looks set for its worst monthly performance against the dollar in over a year.
Looking at sterling, Britain’s budget deficit remains large, but recent actions by the government have signaled a greater commitment to reigning in spending. Along with signs of tighter spending, Bank of England data has shown that unsecured consumer lending picked up in August. This raises concerns about the health of the UK labor market, and further complicates the challenges posed by the Bank’s efforts to control inflation.
Looking at these factors, the dollar has a moderately bullish bias against the euro and a bearish bias against the pound. Major moves in either currency are expected to come from the release of the U.S. PCE report and the jobs report on Friday.
U.S. Dollar Index Technical Analysis: DXY Holds 101.33 as 101.61 Becomes the Next Upside Test
The GBP/USD forecast gap widens from five cents around year-end to thirteen cents by September 2027 as Sterling slips towards 1.32. Goldman Sachs and UBS disagree increasingly about the British Pound to Dollar (GBP/USD) exchange rate as their forecasts extend into 2027.
Goldman's twelve-month projection of 1.28 sits thirteen cents below UBS's September 2027 target of 1.41, comparing broadly equivalent horizons.
Pound Sterling traded at 1.3208 on Tuesday afternoon, down 0.35% from Monday's close and around 2% below its pre-Fed-decision close on 15 September.
Those year-ahead forecasts imply roughly 3.1% downside or 6.8% upside from that snapshot.
Image: GBP/USD intraday chart Goldman forecasts 1.33 in three months and 1.29 in six months before reaching 1.28.
UBS's projected Sterling recovery runs through 1.38 in December 2026 and 1.39 in March 2027, reaching 1.41 in June and holding there in September.
Even Goldman's near-term forecast therefore allows a modest recovery from today's level before renewed weakness.
How much support can the Dollar retain? Goldman links the recent move to US policy and energy costs:
"We see recent Dollar strength as a function of Fed follow-through, pressure from commodity prices, and the associated move higher in yields."
UBS thinks investors have become too aggressive about further tightening:
"While we acknowledge US resilience, we also see stronger European data and believe market pricing has reached peak hawkishness-especially for the Fed."
UBS adds: "That said, we only expect one more rate hike, and believe the data would need to beat expectations strongly for the Fed to tighten beyond that."
The growth comparison remains challenging for Sterling.
S&P Global's September surveys showed the US leading the four largest developed economies, with the UK the weakest performer despite continued expansion.
Yet Goldman's bearish Sterling forecast does not depend on an unqualified call for more Fed hikes.
Its broader Dollar assessment also gives weight to US investment returns:
"We expect relatively low total returns outside of carry, and more mixed Dollar performance from spot levels given our relatively dovish Fed call but solid capital return prospects in the US."
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Key Points:EUR/USD pulled back as traders focused on the sell-off in debt markets. USD/CAD made an attempt to settle above 1.4200 amid falling demand for commodity-related currencies. USD/JPY remained stuck near the 157.50 level.
U.S. Dollar Rallies As Treasury Yields Test New Highs
DXY 290926 4h Chart U.S. Dollar Index gains ground as traders focus on rising Treasury yields and react to JOLTs Job Openings report.
The yield of 30-year Treasuries climbed above the 5.61% level as bond market sell-off continued. The yield of 10-year Treasuries tested new highs near the 5.29% level.
JOLTs Job Openings decreased from 7.335 million (revised from 7.271 million) to 7.079 million, compared to analyst forecast of 7.23 million.
Traders also had a chance to take a look at the CB Consumer Confidence report. The report showed that CB Consumer Confidence declined from 88.6 (revised from 89.4) in August to 81.9 in September, compared to analyst consensus of 89.2.
Currently, U.S. Dollar Index is trying to settle above the resistance level at 101.50 – 101.65. In case U.S. Dollar Index manages to settle above the 101.65 level, it will head towards the next resistance, which is located in the 102.35 – 102.50 range. RSI is in the overbought territory, but there is some room to gain additional upside momentum in the near term.
EUR/USD Tests Support At 1.1335 – 1.1350
EUR/USD 290926 4h Chart EUR/USD is losing ground as traders focus on the weaker-than-expected Euro Area Economic Sentiment Index report. The report indicated that Euro Area Economic Sentiment declined from 98.4 in August to 97.9 in September, compared to analyst consensus of 99.
EUR/USD attempts to settle below the support at 1.1335 – 1.1350. If EUR/USD manages to settle below the 1.1335 level, it will head towards the next support at 1.1250 – 1.1265.
GBP/USD Remains Under Pressure
GBP/USD 290926 4h Chart GBP/USD is moving lower as traders focus on general strength of the American currency. The pullback in the oil markets did not provide any support to GBP/USD as traders have mostly focused on the situation in debt markets.
EUR/USD Price Forecast
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See all EUR/USD forecasts In case GBP/USD manages to settle below the 1.3200 level, it will head towards the support level at 1.3150 – 1.3165. RSI remains in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
USD/CAD Tests New Highs As Rally Continues
USD/CAD 290926 4h Chart USD/CAD continues to move higher as traders react to Canada’s GDP report. The report showed that GDP increased by +0.2% month-over-month in August, in line with analyst estimates. Other commodity-related currencies moved lower in today’s trading session.
Currently, USD/CAD is trying to setlte above the 1.4200 level. In case this attempt is successful, USD/CAD will head towards the next resistance, which is located in the 1.4235 – 1.4250 range.
USD/JPY Is Stuck Near The 157.50 Level
USD/JPY 290926 4h Chart USD/JPY is swinging between gains and losses despite rising Treasury yields. The market is stabilizing after the strong rebound from September lows.
The nearest resistance level for USD/JPY is located in the 158.00 – 158.50 range. If USD/JPY manages to settle above the 158.50 level, it will head towards the next resistance level, which is located in the 160.00 – 160.50 range.
On the support side, a move below the 50 MA at 157.48 will push USD/JPY towards the support at 155.00 – 155.50.
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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.
The Rising channel and higher lows should continue to push the index higher in the near term, but should it break support at 100.67, the trend would likely be in question. Conversely, an upside break and daily close above 101.40 should have a high probability of bringing 101.65 and 101.89 into the equation in the near term.
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GBP/USD Technical Analysis: Sterling Holds 1.3205 as 1.3250 Remains the First Recovery Hurdle
EUR/USD Price Chart – Source: Tradingview The EUR/USD pair is currently trading at 1.1362, and is showcasing further signs of weakness after recently sliding beneath the 1.1325 support zone. Below both of the moving averues, and in a lower high formation, the pair has further potential to the downside, and could still be in a short term formation.
I will be looking for the first significant level of resistance to be near the 1.1412 level. If the pair is able to rise above 1.1412, further resistance may come in near 1.1455, 1.1504 and 1.1558 respectively. If current support at 1.1325 is broken, further support may come in near 1.1266 and 1.1211.
While RSI has been showing some bullish signs near oversold territory, I believe further downside may be limited at the current time. If current support is broken, I may gain a bearish bias near 1.1266. I would gain a bearish bias near 1.1412 if it is tested and broken, and would need to see a bullish move above 1.1455 to negate my current bearish bias.
Pound-Dollar could stay supported if BoE hike bets continue to build, while softer US labour data may limit demand for the Dollar.
The Pound US Dollar (GBP/USD) exchange rate attracted support on Monday as UK diesel hit an all-time high, boosting Bank of England (BoE) interest rate hike bets. However, gains were limited in scope.
At the time of writing, GBP/USD was trading at $1.3250, having briefly touched a five-day high.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.325578 (+0.07%)
Euro to Dollar (EUR/USD): 1.136623 (-0.23%)
Dollar to Yen (USD/JPY): 157.44139 (+0.10%)
DAILY RECAP:
The Pound (GBP) climbed on Monday as UK diesel prices reached a fresh record high, prompting markets to price in a greater chance of tighter monetary policy from the Bank of England in the months ahead.
Average diesel prices at UK forecourts rose to 199.18p per litre, surpassing the previous record set in June 2022 after Russia’s full scale invasion of Ukraine.
Elevated fuel costs can have a broader impact on inflation, particularly as businesses that depend on diesel-powered vehicles for transport may raise their prices to absorb higher operating costs.
With the prospect of stronger inflationary pressures in view, markets increasingly anticipated a more hawkish stance from the BoE.
Meanwhile, the US Dollar (USD) attracted modest support on Monday as the latest reports about the Middle East crisis prompted some caution among investors.
Over the weekend, the US rejected a peace proposal from Iran, which would have reopened the Strait of Hormuz in seven days. After rejecting the deal, President Donald Trump said he expected negotiations to resume soon. However, Tehran pushed back on these claims.
US-China trade news offer investors some hope, however, meaning the market mood wasn’t decisively risk averse. Following in-person talks between President Trump and Chinese President Xi Jinping last week, the two sides released lists detailing around $30bn each in tariff cuts that could boost Sino-American trade.
Near-Term GBP/USD Forecast: Mixed US Data to Mute the Dollar?
Looking forward, Tuesday brings the latest US Job Openings and Labor Turnover Survey (JOLTS). A slight decline in new vacancies could mute USD.
Meanwhile, a forecast uptick in US consumer confidence in September could support the ‘Greenback’. However, if intensifying Middle East tensions and expectations for higher interest rates unexpectedly dented consumer morale last month, USD could stumble.
For Sterling, the UK economic calendar is light on Tuesday, leaving domestic developments in focus. Headlines from the Labour Party Conference could therefore influence the Pound.
Bank of England policymaker Alan Taylor is also scheduled to speak, with his comments potentially shaping expectations for GBP. Any dovish signals could put further pressure on the currency.
Exchange Rates UK Research
Our currency coverage draws on live market data, official economic releases and published bank research.
GBP/USD declined toward 1.3200 before the bulls emerged. A bearish trend line is forming with resistance at 1.3290 on the 4-hour chart. Gold prices weakened and traded below $4,200. WTI Crude Oil started a consolidation phase below $100.00. GBP/USD Technical Analysis The British Pound gained bearish momentum below 1.3250 against the US Dollar. GBP/USD even tested the 1.3200 zone before it found some support.
Looking at the 4-hour chart, the pair settled below 1.3300, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). A low was formed at 1.3204, and the pair started a consolidation phase.
If there is a recovery wave, the pair could face resistance near the 1.3280 level. There is also a bearish trend line forming with resistance at 1.3290. The trend line is close to the 23.6% Fib retracement level of the downward move from the 1.3568 swing high to the 1.3204 low.
A close above the 1.3290 resistance could start a decent recovery wave. The next major hurdle might be 1.3345. The main resistance could be 1.3420 and the 100 simple moving average (red, 4-hour).
A close above 1.3420 could start another steady increase. In the stated case, the bulls could aim for a move to 1.3480. If there is no recovery wave above 1.3290, the pair could start a fresh decline. An initial support sits at 1.3220.
The first major support might be 1.3200. A close below 1.3200 might accelerate the decline. In the stated case, the bears could aim for a move to 1.3150.
Looking at Gold, the bears gained strength, pushed the price below $4,200, and might aim for further downside.
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US Housing Price Index for July 2026 (MoM) – Forecast +0.1%, versus 0% previous. S&P/Case-Shiller Home Price Indices for July 2026 (YoY) – Forecast +2.2%, versus +2.1% previous.
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Key Points:EUR/USD is losing some ground as traders focus on the situation in debt markets. USD/CAD tested new highs amid sell-off in precious metals markets. USD/JPY climbed back above the 157.00 level.
U.S. Dollar Gains Some Ground As Treasury Yields Test New Highs
DXY 280926 4h Chart U.S. Dollar Index moved away from session highs as oil prices pulled back amid reports indicating that Saudi Arabia restarted the key East-West pipeline.
Rising Treasury yields served as the key catalyst for the forex market in today’s trading session. The yield of 2-year Treasuries climbed above the 4.92% level, while the yield of 10-year Treasuries settled near 5.25%.
Traders also had a chance to take a look at the Dallas Fed Manufacturing Index report. The report indicated that Dallas Fed Manufacturing Index declined from 11.6 in August to 9.8 in September, compared to analyst forecast of 1.
In case U.S. Dollar Index stays above the 101.00 level, it will head towards the next resistance level, which is located in the 101.50 – 101.65 range. A successful test of this level will open the way to the test of the next resistance at 102.35 – 102.50.
EUR/USD Attempts To Rebound From Multi-Week Lows
EUR/USD 280926 4h Chart EUR/USD is losing ground as traders focus on the sell-off in global bond markets. In the EU, Germany’s 10-year bond yield reached the highest level since 2009.
The nearest support level for EUR/USD is located in the 1.1335 – 1.1350 range. In case EUR/USD manages to settle below the 1.1335 level, it will head towards the next support, which is located in the 1.1250 – 1.1265 range.
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GBP/USD Gains Ground As Healey Promises Fiscal Discipline
GBP/USD 280926 4h Chart GBP/USD is moving higher as Chancellor John Healey promised fiscal discipline ahead of his debut budget, which would be released on October 28.
GBP/USD is heading towards the resistance level at 1.3285 – 1.3300. If GBP/USD climbs above the 1.3300 level, it will get to the test of the 50 MA at 1.3318. A move above the 50 MA will open the way to the test of the next resistance level at 1.3400 – 1.3415.
USD/CAD Tests New Highs
USD/CAD 280926 4h Chart USD/CAD continues to move higher as traders react to the strong sell-off in precious metals markets. Gold is down by -3.6%, while silver pulled back by almost 5%.
From the technical point of view, USD/CAD climbed above the resistance level at 1.4135 – 1.4150 and is trying to settle above the 1.4170 level. In case this attempt is successful, USD/CAD will head towards the next resistance, which is located in the 1.4235 – 1.4250 range.
USD/JPY Tests The 50 MA At 157.28
USD/JPY 280926 4h Chart USD/JPY is mostly flat as traders are evaluating their next moves amid global bond market sell-off. The magnitude of the sell-off has left traders wondering what to do next.
Currently, USD/JPY is trying to settle above the 50 MA at 157.28. In case this attempt is successful, USD/JPY will head towards the resistance level at 158.00 – 158.50. A move above the 158.50 level will open the way to the test of the next resistance at 160.00 – 160.50. It remains to be seen whether BoJ would be ready to intervene in case USD/JPY climbs above the psychologically important 160.00 level.
On the support side, a move below the 157.00 level will push USD/JPY towards the nearest support at 155.00 – 155.50.
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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.
Cable consolidates above new three-month low at 1.3204, posted last Thursday (just ahead of 1.3193, Fibo 38.2% of 1.2100/1.3870 uptrend) after suffering heavy losses in past two weeks (down 2%).
Partial profit-taking reflects oversold daily studies, but upticks were so far limited with long upper shadow of Friday / today daily candles, pointing to headwinds that recovery attempts face.
Broken Fibo support at 1.3266 (76.4% of 1.3140/1.3675) now acts as solid resistance (as today’s probe above was so far short-lived) with initial signals of potential bull-trap developing on scenario of early recovery rejection.
Daily studies remain firmly bearish however RSI is just about to emerge from oversold territory and suggests that there is more space for recovery.
Firm break of 1.3266 to expose 1.3315 (Fibo 23.6% of 1.3675/1.3204) and 1.3350 (falling daily Tenkan-sen) which should ideally cap extended upticks.
The larger picture shows cable price near the bottom of broader range (1.3150 zone), violation of which would open way for stronger retracement of 1.2100/1.3870 (Jan 2025/Jan 2026 rally).
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US dollar bulls returned in force last week, with net-long exposure rising by $12.5 billion to $17.3 billion – the fastest weekly increase in seven years. Meanwhile, futures traders increased bearish exposure to both the euro and British pound as the dollar rally gathered momentum.
View related analysis:
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How to Read the COT Report to Track Forex Market Sentiment
US Dollar Longs Surge as Euro and Pound Positioning Turns Bearish
Large Speculator Positioning from the COT report
Source: CFTC (COT), LSEG
US Dollar: Net-longs rose at their fastest weekly pace in seven years by $12.5 billion to $17.3 billion
EUR/USD: Asset managers reduced net-longs by 35k contracts and large specs increased net-shorts by 25k contracts
GBP/USD: Net-shorts increased a combined 50.5k contracts to mark their fastest weekly rise in three months
USD/JPY: Traders remained net-long by a combined 113k, despite a reduction of around 58k contracts last week
USD/CHF: Only minor adjustments kept net-short exposure to the Swiss franc by a combined 62.2k contracts
USD/CAD: Prices continued to fall at a faster pace than net-shorts increased, suggesting the late surge of gross-longs have since been forced to cover
AUD/USD: Open interest fell at the fastest weekly pace on record, though net-short exposure only increased marginally
NZD/USD: Large specs and Asset managers reverted to net-short exposure
Asset Manager Positioning | COT Report
Source: CFTC (COT), LSEG
FX Futures Positioning | COT Report (IMM Data)
US Dollar Index (DXY) Futures Positioning | COT Report
We saw a strong influx of bullish bets on the US dollar last week, with net-long exposure rising by $12.5 billion to $17.3 billion – the fastest weekly increase in seven years. And I suspect we’ll see a further increase by the time the next COT report drops, given DXY was only up 0.4% by Tuesday’s close – and went on to rise a further 0.8% by Thursday’s high.
The US dollar index has now rallied 2.6% in 11 days, so I do not think Friday’s pullback is enough to call an end to this rally. Especially since neither the US dollar index nor net-long exposure is near a sentiment extreme.
Traders have a plethora of Fed members speaking this week, alongside ISM, NFP and PCE inflation. My guess at this stage is that they will show a strong economy with inflationary pressures, which leaves little room for Fed members to be any less hawkish than they have been since their last hike.
Source: CFTC (COT), ICE, LSEG
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EUR/USD Futures Positioning | COT Report
My assumption over the past few months that the euro had bottomed is on the brink of being invalidated. But with momentum moving aggressively towards those swing lows, we may not need to wait for the break to invalidate it. The way prices move to or from a level can sometimes be just as, or even more, important than the level itself.
Net-short exposure to EUR/USD futures rose to a five-week high among large speculators, nearly doubling after increasing by 25k contracts over the week. Asset managers reduced net-longs by 35k, resulting in an effective combined shift of around 60k contracts towards a more bearish euro position.
Source: CFTC (COT), CME, LSEG
GBP/USD Futures Positioning | COT Report
It appears the British pound wants to head for its range lows around 1.3150, judging by how bearish momentum is accelerating towards the June low. Gross shorts have been trending higher for a couple of years, yet interestingly, net-short exposure is not flashing an imminent sentiment-extreme warning. The US dollar remains in the driving seat, though diminishing odds of a BOE hike could also decide how quickly GBP/USD breaks that June low – if it takes that route.
Source: CFTC (COT), CME, LSEG
USD/JPY Futures Positioning | COT Report
I stand by my long-held assumption that we saw the low for the Japanese yen this year back in June. While it retraced lower for a second week, a bullish hammer formed on the weekly chart, suggesting the yen is trying to form a swing low.
While large speculators and asset managers trimmed gross longs, they’re not exactly in a rush to short this market after several rounds of intervention. Both sets of traders remain net-long, which supports my ‘buy the dip’ bias for the yen and translates into a ‘fade the rally’ bias for USD/JPY.
The Pound-Dollar could remain under pressure if US payrolls reinforce Fed hike expectations, while Sterling lacks clear domestic support. The Pound US Dollar (GBP/USD) exchange rate tumbled to a two-month low last week amid strengthening bets that the Federal Reserve will raise interest rates faster than previously thought.
At the time of writing, GBP/USD was trading at around $1.3236. A roughly 1.2% slump from the start of last week’s session.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.324595 (+0.27%)
Euro to Dollar (EUR/USD): 1.139251 (+0.16%)
Dollar to Yen (USD/JPY): 157.28686 (-0.97%)
DAILY RECAP:
The US Dollar (USD) initially traded sideways this week as a pullback in oil prices and hopes of progress in US-Iran diplomacy eased some of the geopolitical uncertainty that had been supporting the safe-haven ‘Greenback’.
However, USD sentiment quickly turned bullish as impressive US macroeconomic data saw investors begin to price in a more aggressive pace of monetary tightening from the Federal Reserve.
The release of September’s preliminary US PMI figures proved particularly supportive for USD, with the composite index jumping to 58.4, its highest level since July 2021.
Together with some stronger-than-expected US employment data, this saw investors increase their bets on another 25-basis-point hike at the Fed’s October meeting, with the probability rising to around 70% from 50% at the start of the session.
The Pound (GBP) struggled through the opening stretch of last week, weighed down by an unexpected surge in UK public borrowing that shone an uncomfortable light on the state of the Treasury's finances.
With sovereign bond yields already hovering at multi-year highs, the ballooning deficit only added to anxieties over how little fiscal headroom Chancellor John Healey will have at his disposal for next month's crucial Autumn Budget.
Midweek trading brought fresh headwinds for the Pound, as preliminary PMI data revealed a sharper-than-anticipated slowdown across the vital services sector in September.
However, Sterling was able to stem the bleeding by the end of the week, drawing some modest support from hawkish remarks from a Bank of England’s (BoE) policymaker, which reinforced bets the bank could raise rates in November.
Near-Term GBP/USD Forecast: Greenback to Test Fresh Highs on Strong Payrolls Data Looking ahead to this week, movement in the Pound to US Dollar exchange rate is likely to be dominated by the publication of the latest US non-farm payroll data.
The highly influential employment data could catapult the 'Greenback' to fresh highs if another healthy expansion of the US jobs market helps to cement expectations the Fed will raise rates again at its next meeting.
Back in the UK, a sparse economic calendar leaves Sterling without any clear domestic catalysts, leaving its performance largely dependent on broader currency trends.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Last week, the Fed’s rate hike expectation was reinforced after better than expected U.S. economic data showed further labor market strength. With the American workforce remaining at historically low levels, rate hikes are expected to continue until there is a material change in the U.S. inflation outlook. Similarly, other Fed officials have reiterated the need to control inflation.
The energy crisis creates difficult choices for central banks. For the ECB, the energy crisis pushes inflation up, but not enough to worry about prematurely tightening. Philip Lane was recently quoted saying that there is less of a need to aggressively hike rates, because the main drivers of inflation, wages and services, are not creating as much of a barrier as previously.
The BOE also has inflation that is too high and is expecting a prolonged energy shortage. The October policy meeting resulted in the bank rate being held at 3.75%, but the Bank of England left the door open to future rate hikes.
The Fed is still hiking rates, and the ECB and the BOE have both said they expect to hike rates in the future.
Fundamental bias: DXY moderately bullish, EUR neutral-to-bearish, GBP neutral-to-bearish.
U.S. Dollar Index Technical Analysis: DXY Holds 101.01 as 101.40 Remains the Next Upside Test
Pound-Dollar could remain under pressure if Fed hike bets stay elevated, although weaker US durable goods orders may offer Sterling some respite. The Pound US Dollar (GBP/USD) exchange rate fell to a three-month low on Thursday as Federal Reserve interest rate hike bets boosted USD.
At the time of writing, GBP/USD was trading at $1.3226, having bounced off its lowest point of $1.3215 but still down on the day.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.321538 (-0.17%)
Euro to Dollar (EUR/USD): 1.136745 (-0.12%)
Dollar to Yen (USD/JPY): 158.93551 (+0.42%)
DAILY RECAP:
The US Dollar (USD) remained strong on Thursday as markets continued to price in more muscular action from the Federal Reserve to tame inflation.
Hawkish Fed bets were boosted by Wednesday's forecast-smashing PMI releases, which fuelled beliefs that the American economy may be running hot.
On Thursday, an unexpected decline in initial jobless claims added to Fed hike bets.
Markets now see a greater than 50% chance that the Federal Reserve will deliver 50 basis points of tightening by the end of the year.
Meanwhile, the Pound (GBP) struggled as Fed rate hike bets triggered turmoil in global bond markets.
This raised concerns about the UK’s tough fiscal position ahead of the Autumn Budget, amid reports that the Treasury will look to reduce its fiscal headroom to avoid raising taxes.
Additionally, weaker-than-expected figures from the Confederation of British Industry (CBI) weighed slightly on the Pound, although the impact was limited.
Near-Term GBP/USD Forecast: US Durable Goods Orders to Dent the Dollar? Looking forward, Friday brings the latest US durable goods orders figures. An expected contraction in August could dent USD.
However, the ‘Greenback’ could remain supported if hawkish Federal Reserve interest rate bets continue to boost USD demand.
In addition, market risk appetite could influence the GBP/USD pairing, with the safe-haven US Dollar potentially drawing support from a risk-off mood. Geopolitical tensions and worries about higher global borrowing costs could dampen risk appetite and support the American Dollar.
Meanwhile, a lack of UK economic data means Sterling may also be primarily influenced by wider market trends, including risk sentiment, bond market movements, and domestic headlines.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
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Rising Federal Reserve rate-hike expectations, higher Treasury yields and renewed dollar strength are increasing downside pressure across markets.
The GBP/USD and Dow Jones charts are now testing defining support levels, while daily momentum indicators point to oversold conditions and potential reversal risks.
Source: CME FedWatch Tool
The probability of a 25-basis-point rate hike at the October meeting has risen above 70%, according to the CME FedWatch Tool. This has supported the U.S. Dollar Index and helped push it back toward its 2026 uptrend near 101.
Although the latest advance has been steep across currency and bond markets, momentum is becoming increasingly stretched. Important technical patterns are also emerging across major charts:
The dollar and euro are testing daily overbought and oversold conditions last seen in June and near yearly extremes, increasing reversal risks below 101 in the DXY and above 1.13 in EUR/USD.
GBP/USD is testing support extending from November 2025 near 1.32.
Gold and silver are testing the boundaries of the July–September advance while maintaining their bullish bias, although that structure is increasingly challenged by the resurgence in Treasury yields and the dollar.
U.S. indices are experiencing a pullback after the Nasdaq surged by more than 1,000 points this week toward its record highs, while the Dow has extended its decline to 4-month lows.
The broader cross-asset picture is becoming increasingly stretched, with the U.S. 10-year Treasury yield rising toward highs last seen in 2007 and overbought momentum conditions last seen in 2023.
Markets may now be one move away from confirming another wave of distress or reversing the current risk-off pressure.
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GBP/USD Price Outlook: Weekly Time Frame — Log Scale
Source: TradingView
The GBP/USD chart has been trading within a contracting sideways range since November 2025.
The latest dollar rally has pressured the pound toward the lower boundary of this range, near the yearly lows and the 1.32 area.
A close below 1.3200 would expose 1.3100 and the psychological level at 1.3000, increasing the risk of further downside.
However, oversold RSI readings on both the hourly and daily time frames, combined with year-long support, could help trigger a bullish rebound.
A close back above 1.3340 and 1.3400 would help reinstate the short-term bullish bias.
Dow Jones Price Outlook: Daily Time Frame — Log Scale
Source: TradingView
From a daily perspective, the Dow Jones is still holding below the uptrend support line that has been in place since the April 2026 lows.
The index is also holding above the 61.8% Fibonacci retracement of the May–August advance near 51,200.
Bearish scenario: A breakdown below 51,200 would target the 78.6% and 100% Fibonacci retracement levels near 50,300 and 49,000, respectively.
A sustained move below these levels would increase the risk of a broader bearish outlook for the year.
Bullish scenario: Reclaiming 51,900, 52,700 and 53,400 would support the continuation of the bullish bias toward 54,000 and the yearly high near 54,800.
These levels are defined using the Fibonacci extension tool applied to the May–August–September wave.
A move above 54,800 would reinforce the uptrend and expose the trendline connecting the higher highs since April 2026, near 57,000.
The Fed’s tone, U.S. Treasury yields and crude oil’s price direction will likely play a key role in shaping the next potential market trends.
The Pound-Dollar could remain under pressure if US-China tensions lift safe-haven demand, while dovish BoE remarks may add to Sterling’s losses. The Pound US Dollar (GBP/USD) exchange rate sank to its worst levels since late July on Wednesday as hawkish Federal Reserve rate bets continued to underpin USD demand.
At the time of writing, GBP/USD was trading at around $1.3290. Down roughly 0.4% from Wednesday’s opening levels.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.324388 (-0.74%)
Euro to Dollar (EUR/USD): 1.138835 (-0.52%)
Dollar to Yen (USD/JPY): 158.22559 (+0.47%)
DAILY RECAP:
The US Dollar (USD) maintained a positive trajectory on Wednesday, with the currency continuing to draw support from expectations of further interest rate increases from the Federal Reserve.
The Fed’s hawkish shift following last week’s 25-basis-point rate hike has encouraged markets to price in another increase before the end of the year.
Recent comments from Fed policymakers have reinforced this outlook. Boston Fed President Susan Collins argued that a somewhat more restrictive policy stance is needed to bring inflation sustainably back to the central bank’s 2% target, while other officials have also warned that persistent inflationary pressures could warrant further tightening.
At the same time, lingering geopolitical uncertainty also continued to support USD demand, particularly after an, at times, inflammatory speech from US President Donald Trump at the United Nations General Assembly on Tuesday.
The Pound (GBP) lost ground on Wednesday after fresh survey data revealed a noticeable loss of momentum across the UK's dominant services industry.
September's flash PMI figures showed services activity sinking to a three-month low of 51.7, retreating further than the anticipated slip to 52 from August's 52.5 reading.
Although the sector managed to stay on the right side of the 50.0 expansion line, the drop in pace arrives alongside stubbornly sticky input costs.
Mounting cost pressures continue to make the case for near-term Bank of England (BoE) action, but flagging service activity throws a wrench into the works.
Walking the line between snuffing out persistent inflation and avoiding outright economic stagnation remains an increasingly fraught task for Threadneedle Street.
Near-Term GBP/USD Forecast: Trump-Xi Meeting in the Spotlight Looking ahead to Thursday's session, the next major catalyst of movement for the Pound to US Dollar (GBP/USD) exchange rate may be Trump's meeting with his Chinese counterpart XI Jinping.
Markets are unsure what to expect from the latest face-to-face between the leaders of the world's two superpowers, but any signs of tensions could rattle markets and underpin demand for safe-haven assets such as the 'Greenback'.
GBP investors, meanwhile, will be focused on Thursday's speech from Bank of England policymaker Swati Dhingra.
As one of the most dovish voices on the Monetary Policy Committee (MPC), any cautious remarks questioning the wisdom of higher borrowing costs could trigger another move lower for Sterling.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
GBPUSD continues to unfold a short‑term decline from the August 21, 2026 high, developing as a five‑wave impulse. From that peak, wave ((i)) concluded at 1.3474, followed by a corrective rally in wave ((ii)) that ended at 1.3569. The pair then resumed lower in wave ((iii)), reaching 1.3335, before a modest rally in wave ((iv)) concluded at 1.34. Price action now suggests that wave ((v)) is nearing completion, which should finalize the cycle from the August 21 high. Once this impulse ends, the pair is expected to stage a three‑wave corrective rally to retrace the decline before resuming its broader bearish trend.
The technical picture becomes more compelling if GBPUSD breaks below the June 24, 2026 low at 1.314. Such a move would confirm five swings down from the August 21 high, reinforcing the view of a double three corrective structure labeled (W)‑(X)‑(Y). This development would favor further downside and open the path toward an extended target zone. The extreme area is defined by the 100% to 161.8% Fibonacci extension of wave (W), which projects into the 1.249 to 1.294 region. This zone represents the next critical support cluster and should attract significant market attention. The overall sequence highlights the persistence of bearish momentum. Corrective rallies likely to fail and give way to renewed weakness.
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The US dollar continued to press higher deep into the European session, supported by the slump in the bond markets as yields broke out across the curve. Following the recent hawkish Fed rate hike, yield spreads between the US and the rest of the world has continually increased, and that motion continued today, helped in part by some forecast-beating US macro data and hawkish Fed commentary. So, down went the major pairs like the EUR/USD and GBP/USD, gold and Bitcoin; up went the USD/JPY and USD/CHF as the greenback rallied across the board. The GBP/USD has been hurt further by the recent dovish Bank of England rate decision. As before, we maintain a short-term bearish GBP/USD forecast.
Dollar surges and bond markets implode with yields breaking out
The dollar continues to show resilience despite the recent softer energy prices and a more risk-friendly backdrop. Both of those factors have reversed today, with oil bouncing back and indices taking a dip. The Fed story remains the dominant force in FX, with hawkish policymakers doing enough to keep the dollar in demand. Economic data has also been supportive today as the S&P Global US composite PMI jumped to 58.4 from 56.0 in August, reaching it highest level since July 2021. Services led the advance and hiring strengthened, but businesses also reported higher input costs – pointing to more inflation and giving the Fed more reason to raise rates again.
Source: TradingView.com
The result of the hawkish FedSpeak and rising bets of policy tightening have sent the US 10-year yields above 5.0% and 30-year yields were testing 2007 highs.
BoE also applies pressure on sterling
The Bank of England was softer than markets had anticipated last week, and this has no doubt played a part in the GBP/USD exchange rate falling in recent days.
The bank acknowledged that rates could rise if the energy shock persists and starts generating second-round effects. But Governor Bailey offered little commitment to a November move, while policymakers noted that there is still “little evidence so far of material second-round effects”.
That may ultimately prove to be proven wrong. The more consequential announcement, however, was the overhaul of quantitative tightening. The BoE said it will halt gilt sales for six months and stop selling its long-dated holdings altogether.
Technical GBP/USD forecast and levels to watch
Source: TradingView.com
The GBP/USD has taken a dump along with other major pairs, but the technical damage could weigh on the pair for a while now given that it has broken a key level around 1.3270ish. The June low sits at 1.3140 and the November 2025 low is at 1.3010. Those are the next targets on the downside, and we could get there fairly quickly unless something changes fundamentally. On the upside. 1.3335 is now the most important resistance area to watch now. The 200-day average and next resistance comes in around 1.3450-70 area.
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The Pound-Dollar rate could test fresh lows if UK PMIs weaken, while resilient US activity may reinforce Federal Reserve rate hike expectations. The Pound US Dollar (GBP/USD) exchange rate struck its worst levels since late July on Tuesday morning following the publication of the UK's latest borrowing data.
At the time of writing, GBP/USD was trading at around $1.3356. Slightly down on Tuesday’s opening levels, but above the almost two-month low struck earlier in the session.
Latest — Exchange Rates:
Pound to US Dollar (GBP/USD): 1.3356
DAILY RECAP:
The Pound (GBP) faced fresh selling pressure on Tuesday following an unwelcome jump in British government borrowing, which raised new questions about the Treasury's fiscal flexibility ahead of next month's Budget.
Official data from the Office for National Statistics (ONS) showed public sector net borrowing surged to £18.3bn in August, well ahead of the projected £15.7bn.
This unexpected deficit expansion highlights the acute fiscal constraints facing Chancellor John Healey, whose fiscal headroom continues to shrink ahead of his inaugural budget next month.
The US Dollar (USD) initially firmed on Tuesday, buoyed by risk-off flows and hawkish Federal Reserve interest rate expectations.
However, the 'Greenback' then pared almost all of its gains on reports that Iran is willing to reopen the Strait of Hormuz if the US takes steps to reduce military pressure.
The news sparked a pullback in global oil prices, with Brent crude slipping back below $100 per barrel for the first time in two weeks.
However, the recovery in risk appetite remained modest, as the proposed reopening remains conditional and the US has so far shown no signs it is willing to accept Tehran's terms.
Near-Term GBP/USD Forecast: Limited Data to Looking ahead, the Pound to US Dollar (GBP/USD) exchange rate may test fresh lows in mid-week trade with the publication of the UK's preliminary PMIs for September.
Consensus forecasts predict a moderation of activity across both the manufacturing and services sectors as the third quarter draws to a close.
A confirmation of softer business activity could dent investor appetite for the UK currency, particularly if traders bet that weaker domestic momentum will ensure the Bank of England (BoE) remains cautious regarding future interest rate hikes.
Meanwhile, while not as close watched as the ISM releases, the latest US S&P PMIs could influence the US Dollar on Wednesday afternoon.
Continued resilience in the US private sector is likely to cement Fed rate hike bets and underpin USD demand.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
With the Fed’s current trajectory, which aims to reach a terminal rate of 4.25%-4.50%, and Barkin’s remarks, it is highly likely that the target range will rise by another 25 bps by the end of the year. Despite a recent increase in odds for a rate hike in October, which now stands at around 53%, the greenback has appreciated against a basket of peers.
Although higher interest rates in the U.S. are historically positive for the euro, the recent hikes by the ECB and dovish outlook by most of its members means that the ECB will be behind the curve for an extended period. Falling energy prices mean that inflation will become less of a concern for the euro area.
The Bank of England (BoE) is in a delicate situation regarding interest rates. The BoE believes that further disruptions to the energy market could result in higher rates. Last week, the BoE kept rates at 3.75%. Currently, the markets expect there is a 65% chance the BoE will raise rates in November. Most market participants expect the BoE to raise rates four times in the next two years, each time by a quarter of a percent. Recently, economic data out of the UK has surprised to the upside. In August, UK retail sales rose. Also in August, UK economic growth was higher than expected.
Oil prices have the potential to move other asset prices in the foreseeable future. The U.S. and Iran have been in talks and have signaled they are willing to resolve their differences. Lower oil prices may reduce inflation and cause central banks to slow their pace of tightening.
The DXY (USD index) has the potential to appreciate; the EUR and GBP are expected to depreciate.
U.S. Dollar Index Technical Analysis: DXY Holds Above 100.53 as 100.83 Becomes the Next Upside Test
Key Points:EUR/USD pulled back as Euro Area Consumer Confidence missed analyst estimates. GBP/USD tested new lows as pullback continued. USD/JPY gained ground, supported by rising Treasury yields.
U.S. Dollar Tests New Highs
DXY 220926 4h Chart U.S. Dollar Index gains ground as traders focus on Trump’s speech at UN General Assembly. President Trump said that he could make a deal with Iran but would destroy the country in case Iran refused to make a deal.
Brent oil rebounded towards the $100.00 level as oil traders reacted to Trump’s words. The rebound in the oil market raised demand for safe-haven assets, providing support to the American currency.
Hawkish comments from Fed’s Collins provided additional support to U.S. dollar. She noted that she supported the rate hike and warned about inflation risks.
Currently, U.S. Dollar Index is trying to settle above the resistance level at 100.50 – 100.65. In case this attempt is successful, U.S. Dollar Index will head towards the next resistance level, which is located in the 101.50 – 102.00 range.
EUR/USD Tests Support At 1.1420 – 1.1435
EUR/USD 220926 4h Chart EUR/USD tested new lows as traders focused on the Euro Area Consumer Confidence report. The report showed that Euro Area Consumer Confidence decreased from -15.5 in August to -16.5 in September, compared to analyst forecast of -16.
EUR/USD attempts to settle below the support at 1.1420 – 1.1435. If U.S. Dollar Index manages to settle below the 1.1420 level, it will head towards the next support level, which is located in the 1.1335 – 1.1350 range.
GBP/USD Remains Under Pressure
GBP/USD 220926 4h Chart GBP/USD is under pressure as traders stay bearish amid geopolitical tensions and inflation worries. There are no important economic reports scheduled to be released in the UK today, so traders will stay focused on general market sentiment.
The nearest support level for GBP/USD is located in the 1.3285 – 1.3300 range. If GBP/USD declines below the 1.3285 level, it will head towards the next support at 1.3150 – 1.3165. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
EUR/USD Price Forecast
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USD/CAD Tests Resistance At 1.4065 – 1.4080
USD/CAD 220926 4h Chart USD/CAD continues to move higher amid lack of positive catalysts for the Canadian dollar. Other commodity-related currencies are mixed in today’s trading session.
From the technical point of view, USD/CAD attempts to settle above the resistance level at 1.4065 – 1.4080. If USD/CAD manages to settle above the 1.4080 level, it will move towards the next resistance, which is located in the 1.4135 – 1.4150 range.
USD/JPY Moves Higher As Treasury Yields Rise
USD/JPY 220926 4h Chart USD/JPY gains some ground as traders focus on rising Treasury yields. The yield of 2-year Treasuries climbed back above the 4.75% level, while the yield of 10-year Treasuries settled near 4.97%. I’d note that the yield of 30-year Treasuries moved above the important 5.30% level, so Bessent’s buybacks have so far failed to push yields lower.
The nearest resistance level for USD/JPY is located in the 158.00 – 158.50 range. A successful test of this level will open the way to the test of the next resistance at 160.00 – 160.50. The key question is whether BoJ is ready to intervene in case USD/JPY climbs above the psychologically important 160.00 level.
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GBP/USD trades near 1.3370, close to a six-week low, after UK government borrowing exceeded forecasts and renewed concerns over the country's public finances. UK public sector net borrowing reached £18.3 billion in August, while the deficit for the first five months of the fiscal year climbed above the Office for Budget Responsibility's forecast. The GBP/USD forecast remains under pressure below 1.3500 as the Federal Reserve signals further rate hikes while the Bank of England keeps rates unchanged. GBP/USD is trading near 1.3370 on Tuesday as weaker UK fiscal data and continued US Dollar strength keep the British Pound close to its lowest level in six weeks.
Sterling briefly recovered toward 1.3390 earlier in the session before giving back part of the advance after UK government borrowing came in significantly above expectations. The pair was trading around 1.3368 at 12:36 GMT, according to the latest market data.
The move extends a difficult September for the Pound. The Federal Reserve’s return to rate hikes has strengthened the Dollar, while falling oil prices have reduced expectations that the Bank of England will need to respond aggressively to energy-driven inflation.
GBP/USD Today: UK Borrowing Exceeds Forecasts The latest pressure on GBP/USD today came from UK public finance data. Public sector net borrowing excluding public sector banks reached £18.3 billion in August, up from £15.4 billion a year earlier and above market expectations of around £15.5 billion. It was the second-highest August borrowing figure on record after 2020.
Borrowing during the first five months of the fiscal year has now reached £77.3 billion, around £8.1 billion above the Office for Budget Responsibility’s forecast. The deterioration came despite stronger tax receipts, with higher spending on public services, benefits and debt-interest costs contributing to the increase.
For currency markets, the figures have renewed attention on Britain’s fiscal position ahead of Chancellor John Healey’s first Budget on October 28.
British Pound Outlook: UK Budget Risks Return The British Pound outlook is becoming increasingly sensitive to UK fiscal policy. Higher government borrowing combined with elevated gilt yields could reduce the Chancellor’s room to meet existing fiscal rules without tax increases, spending reductions or other policy changes.
The UK 10-year gilt yield was around 5.24% on Tuesday, reversing part of a four-day decline as bond yields moved higher across Europe.
Higher yields do not automatically strengthen Sterling when they reflect concerns about government finances. Investors are instead assessing whether rising debt-servicing costs will further squeeze the government’s fiscal headroom ahead of the October Budget.
KPMG estimates that fiscal headroom could fall to around £12 billion from £23.6 billion in March, adding to speculation over what measures could be announced next month.
US Dollar Today: Fed Rate Hike Keeps Greenback Supported The other side of the GBP/USD exchange rate remains dominated by the Federal Reserve. The US Dollar has held close to a seven-week high after the Fed raised interest rates by 25 basis points last week, taking the federal funds target range to 3.75%-4.00%.
More importantly for currency markets, policymakers indicated that further tightening may be necessary this year.
Comments from Fed officials have since reinforced that message. Chicago Fed President Austan Goolsbee and St. Louis Fed President Alberto Musalem have both indicated that tighter monetary policy may still be required to bring inflation sustainably back toward target.
That has helped maintain the Dollar’s interest-rate advantage and kept pressure on GBP/USD even as the Pound attempts to stabilise.
Bank of England Interest Rates: Markets Scale Back Hike Bets The Bank of England interest rate outlook is moving in the opposite direction. The BoE left rates unchanged last week, while a retreat in crude oil prices has subsequently reduced some of the urgency surrounding another UK rate increase.
Brent crude fell toward $100 per barrel after President Donald Trump left open the possibility of a diplomatic solution with Iran and additional regional supplies helped ease immediate concerns over shortages.
Lower energy prices matter for the UK because they reduce the risk that the recent oil shock feeds more persistently into inflation. For Sterling, however, that also means markets have less reason to price aggressive BoE tightening.
The resulting Fed-BoE policy divergence has become an important driver for GBP/USD: US policymakers are signalling additional tightening while expectations for another UK hike have softened.
GBP/USD Forecast: Can the Pound Recover Above 1.3400? The GBP/USD forecast remains cautious after the Pound’s sharp decline during September. GBP/USD is trading near 1.3368, below its 20-day moving average at approximately 1.3490. The pair has also fallen below the rising trend that had supported the recovery from its June lows.
The immediate level to watch is 1.3400. A sustained recovery above it could ease some of the current downside pressure, with 1.3490-1.3500 forming the next important area.
On the downside, 1.3300 provides the first major psychological level. A deeper decline would bring the late-July region around 1.3275 into focus, followed by 1.3200.
The broader direction will depend less on any single technical level than on the evolving Fed-BoE interest-rate gap and the UK’s fiscal outlook. For now, both have moved against Sterling, leaving GBP/USD vulnerable while it remains below 1.3500.
Why is GBP/USD falling today?
GBP/USD is under pressure after UK government borrowing exceeded forecasts while the US Dollar remains supported by expectations for further Federal Reserve rate hikes. UK borrowing reached £18.3 billion in August, renewing concerns about the government’s fiscal position ahead of the October Budget.
Will the Bank of England raise interest rates again in 2026?
Expectations for another Bank of England rate hike have weakened as oil prices retreat from recent highs. The BoE left rates unchanged at its September meeting, and markets are now assessing whether easing energy costs will reduce the need for additional tightening.
What is the GBP/USD forecast after the Fed rate hike?
The GBP/USD outlook remains under pressure while the pair trades below 1.3500. Further Fed tightening could maintain support for the Dollar, while a recovery in Sterling would likely require either stronger UK fundamentals or a reduction in expectations for additional US rate hikes.
GBP/USD edged higher to 1.3371 on Tuesday. Markets have scaled back expectations of a Bank of England rate hike following the decline in oil prices.
Brent crude fell to 100 USD per barrel after Donald Trump left open the possibility of a diplomatic solution with Iran. An increase in regional oil supplies added to the downward pressure on prices, easing concerns about an immediate supply shortage.
Bank of England officials stressed last week that the outlook for inflation and interest rates will largely depend on oil and gas prices in the coming months. Markets now estimate the probability of a Bank of England rate hike in November at approximately 80%, and that of another increase before year-end at around 56%.
Attention is also gradually shifting to the UK autumn Budget. According to media reports, the government is considering extending the new property tax to homes worth more than 1.5 million USD.
At the same time, the US dollar remains supported by expectations of further Federal Reserve rate increases, continuing to limit the scope for a GBP/USD recovery.
Technical Analysis
On the H4 GBP/USD chart, the market completed an upward move towards 1.3399, followed by a correction to 1.3358. The pair has now broken above the downward channel at 1.3381, opening the way for another move higher towards 1.3431, followed by a decline to 1.3390.
The MACD indicator supports this scenario. Its signal line remains below zero and is pointing firmly upwards.
On the H1 GBP/USD chart, the market has formed a narrow consolidation range around 1.3380, currently extending downwards to 1.3358 and upwards to 1.3385.
A move higher towards the local target at 1.3431 is expected.
The Stochastic oscillator supports this scenario. Its signal line is above 50 and is pointing firmly upwards, with a move towards 80 expected in the short term.
Conclusion GBP/USD remains in limbo as markets scale back expectations of a Bank of England rate hike following the decline in oil prices. The probability of a November rate hike remains elevated at around 80%, while that of another increase before year-end stands at approximately 56%. Attention is also turning to the UK autumn Budget. Meanwhile, expectations of further Federal Reserve tightening continue to support the US dollar and limit sterling’s upside potential.
From a technical perspective, the pair is expected to move higher towards 1.3431 in the short term. Once this move is complete, the H4 scenario envisages a decline towards 1.3390.
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GBP/USD struggles as UK government borrowing exceeds forecasts, putting pressure on Healey
GBP/USD is struggling above 1.3350, around a six-week low, amid ongoing U.S. dollar strength and following data showing that UK public sector net borrowing was higher than expected in the first five months of the fiscal year.
UK public sector net borrowing was £18.3 billion in August, higher than the £15.4 billion recorded in the same month last year and ahead of expectations of around £15.5 billion. This was the second-highest August on record, behind 2020.
The UK deficit has climbed to £77.3 billion in the first five months of the fiscal year, £8.1 billion more than the Office for Budget Responsibility forecast.
These figures highlight the challenges facing Chancellor John Healey as he prepares his first Budget on October 28. The government needs not only to set out Prime Minister Andy Burnham's economic plans but also reassure a jittery bond market that borrowing remains under control.
The 10-year gilt yield is around 5.24%, mirroring moves in Europe as oil prices rise and snapping a four-day decline.
The rise in borrowing in August came despite improvements in tax receipts and reflected higher spending on public services and benefits, as well as increased debt interest costs.
Healey's room for manoeuvre is becoming increasingly limited, as higher borrowing costs, partly triggered by the Middle East conflict, have already reduced the government's fiscal headroom. KPMG estimates that headroom could fall to around £12 billion from £23.6 billion in March.
Speculation is therefore rising that the government will need to raise taxes or cut spending to rebuild its fiscal headroom.
Elsewhere, the U.S. dollar is pushing higher, extending gains from last week to a seven-week high after the Federal Reserve hiked interest rates and signalled at least one more rate hike this year.
Comments from Federal Reserve officials at the start of the week also reinforced expectations for further rate hikes, with Chicago Fed President Austan Goolsbee and St. Louis Fed President Alberto Musalem suggesting that tighter policy may be necessary to achieve the Fed's inflation target.
The BoE left rates unchanged last week. The BoE-Fed divergence is keeping GBP/USD under pressure.
GBP/USD forecast – technical analysis
GBP/USD broke down from the ascending channel, falling below the 50 and 200 EMAs. Combined with the RSI below 50, this keeps sellers hopeful of further downside.
Sellers will look to take out support at 1.3340 to turn attention to 1.3275, the late-July low. Below here, attention turns to the 1.3200 support zone.
Any recovery would first need to take out the 200 EMA at 1.3425. A rise above here turns attention to the 1.3500 resistance zone, which combines horizontal resistance, the lower band of the rising channel and the 50 EMA. A rise above 1.3500, the September high, would put the pair on a firmer footing.
DAX eases back after yesterday's gains as oil prices and political headwinds rise
The DAX, together with its European peers, is easing back after solid gains in the previous session.
The DAX rallied over 1% yesterday, boosted by tech and bank strength as oil prices retreated. However, today, a rise in oil prices is pushing bond yields higher, hurting demand for riskier assets such as equities.
Weakness in autos and financials is putting pressure on the index, whilst lingering political uncertainty in Germany adds to a cautious tone.
German political uncertainty remains a background headwind. Chancellor Friedrich Merz's CDU suffered significant losses in recent regional elections, raising questions over his political position and potentially making it harder for Germany to drive EU policy, including negotiations over the €2 trillion EU budget.
In elections in Mecklenburg-Western Pomerania on Sunday, the CDU fell below the 5% threshold for entering the state parliament, marking its worst result in the post-war period.
On the data front, the German economic calendar is quiet today, with attention turning to PMI figures tomorrow.
DAX forecast – technical analysis
The DAX ran into resistance around 26,500, forming a double top before reversing lower and breaking below its rising trend line to find support around the 25,500 zone. The RSI is below 50.
Sellers will need to take out the 25,500 support zone to create a lower low and turn attention to 25,000, the round number, and the 200 EMA at 24,900. Below here, sellers could gain traction.
Any recovery would need to rise above the 50 EMA at 25,700 and the horizontal and rising trend-line resistance at 25,800. Above here, attention turns to 26,500 and fresh record highs.
Dollar Index Outlook: Fed Hike Bets Support Dollar as EUR and GBP Face Diverging Policy Paths The Federal Reserve’s hawkish stance on inflation has strengthened the U.S. dollar on Monday as investors expect the central bank to increase interest rates beyond the recent increase. The CME Group’s FedWatch tool shows that the chances of a 0.25% hike in the target range for the federal funds rate in October has increased to around 56%, from 43.5% last Wednesday.
On Monday, St. Louis Fed President Alberto Musalem said that he expects that inflation will remain above the central bank’s target for a prolonged period of time, and that further increases to the policy rate will be appropriate. According to the latest projections from the Fed, the policy rate will be increased in December.
In the short term, the declining price of oil could mitigate the effects of a stronger U.S. dollar. Declining Treasury yields have eased investors’ concerns about energy supply. However, the U.S. dollar has appreciated against a group of peer currencies over the last few weeks, and it is expected that U.S. yields will continue to increase.
The euro has fewer near-term catalysts. The European Central Bank raised rates in July. However, some officials recently said not to read too much into energy price increases and that they don’t necessarily call for larger rate increases. Falling energy prices should ease inflation, which supports the case for no further rate increases.
There is more support for the British pound. The Bank of England kept rates at 3.75% last week, but said it could increase rates if the disruption in the energy supply from the Middle East continues. Three months’ worth of inflation swaps, which reflect market expectations for future interest rates, show a 65% probability of a rate increase in November and indicate that the bank could increase rates by an additional 1.25 percentage points by the end of 2027. Other recent economic data supported the case for higher interest rates. August’s retail sales grew and July’s GDP growth was greater than expected.
Fundamental bias: I am neutral to slightly bullish on the British pound and euro against the dollar.
U.S. Dollar Index Technical Analysis: DXY Holds 100.33 Support as 100.53 Breakout Comes Back Into Focus
Dollar Index Price Chart – Source: Tradingview The U.S. Dollar Index is currently trading at 100.45. I’m interested in the short-term trend. Note that the index is trading above a rising trendline and recent support at 100.33. A quick buy of the dip to the rising trendline indicates that 100.33 and the rising trendline continue to delineate supporting levels.
The 100.53 level represents the next major resistance. Should 100.53 be taken out, the next levels of interest would be 100.68 and 100.83. The 100.33 level, rising trendline, and 100.19 would provide support should the current uptrend be surrendered. The 100.04 and 99.89 levels would also provide support.
EUR/USD Price Forecast
Every new EUR/USD analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all EUR/USD forecasts From a momentum perspective, the Rising trendline and current support at 100.33 are providing support to the bullish outlook. A move below the 100.19 level would negate this outlook. The bullish outlook would also be negated should a move above 100.53 lead to a breakout to the upside with the next target levels at 100.68 and 100.83.
GBP/USD Technical Analysis: Sterling Holds 1.3365 Support as 1.3405 Remains the Key Recovery Hurdle
GBP/USD Price Chart – Source: Tradingview The GBP/USD pair trades at 1.3372 and is consolidating above the 1.3365 support level on the 2 hour time frame. Currently, the price action is below the 200 and 100 hour moving averages and a descending trend line. However, the pair has recently formed a series of higher lows from 1.3336 and this suggests that bears have lost their momentum to push the pair lower.
If the bulls can break the 1.3405 resistance level, then the trend line and higher levels would come into play. The 1.3365 support level would be the next floor if the bears make a return. The 1.3336 and 1.3307 levels would also see increased interest if the sellers gain control.
The relative strength index (RSI) is in the center suggesting that no clear trend is present. With the 1.3405 level as a resistance and the trend line as a lower boundary, a bearish bias is warranted. A bullish bias would be realized if the 1.3436 level is cleared to the upside. The 1.3336 level would also come into play on the downside if support is broken.
EUR/USD Technical Analysis: Euro Slips Back Toward 1.1457 as Descending Trendline Keeps Pressure Intact
EUR/USD Price Chart – Source: Tradingview EUR/USD is currently trading at 1.1461. It is hovering around the 1.1478 resistance level which has capped its upside moves and above which further upside is expected to be seen.
Nonetheless, EUR/USD is below both the 20 and the 100 hour moving averages and a descending trendline which continues to give a bearish bias. The upward move from the lows is also capped by the 1.1492-1.1502 resistance level.
The near term 1.1457 level is the first support below which the 1.1444 and 1.1430 support levels are located. The 1.1478 resistance level is located above which is followed by the 1.1492-1.1502 levels, and then by the 1.1513 resistance level.
RSI is also indicating bearish momentum. Bearish bias will be in effect as long as prices are below the 1.1478 and 1.1492 resistance levels and the descending trendline. A break above 1.1502 is expected to give a bullish outlook.
The Pound-Dollar rate could come under pressure if UK borrowing rises, while dovish Fed commentary may limit support for the US Dollar. The Pound US Dollar (GBP/USD) exchange rate was subdued on Monday as central bank dynamics continued to impact the pairing following last week’s policy announcements.
At the time of writing, GBP/USD was trading at $1.3387, down marginally on the day.
Latest — Exchange Rates:
Pound to Dollar (GBP/USD): 1.337673 (-0.13%)
Euro to Dollar (EUR/USD): 1.14738 (-0.10%)
Dollar to Yen (USD/JPY): 157.3522 (+0.30%)
DAILY RECAP:
The Pound (GBP) lacked direction on Monday, with a quiet UK data calendar giving Sterling little impetus to make a decisive move.
The currency also remained subdued following last week’s Bank of England (BoE) decision. The central bank left interest rates unchanged but reduced the pace of its bond sales, a move that contributed to some losses for the Pound.
Meanwhile, the US Dollar (USD) initially traded with modest gains on Monday as USD continued to enjoy the afterglow of last week’s Federal Reserve interest rate decision.
In a unanimous vote, the Fed hiked rates for the first time since 2023. Markets increased their bets for further hikes following the decision. This continued to underpin the US Dollar on Monday.
However, the safe-haven currency found itself limited as market risk appetite improved during the European session.
Near-Term GBP/USD Forecast: Jump in Government Borrowing to Pressure the Pound? Looking forward, Tuesday’s UK data could give the Pound a clearer direction, with the government’s latest borrowing figures likely to attract attention first.
A rise in borrowing during August could put pressure on Sterling by prompting fresh concerns over the health of the public finances ahead of the Autumn Budget.
The Pound could then come under additional pressure when the Confederation of British Industry (CBI) releases its industrial trends orders. If the data points to a sharper deterioration in industrial orders, Sterling may struggle further.
As for the US Dollar, speeches from two Federal Reserve officials could influence the ‘Greenback’. Despite voting for a rate hike last week, policymakers John Williams and Philip Jefferson are both on the more dovish end of the scale. If they indicate that one hike may be enough to tame inflation, the US Dollar could stumble.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
