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Pound Sterling Price News & Forecast: GBP/USD weakens to around 1.3470 on Wednesday
Confirmed
In Short: The British Pound (GBP) weakened against the US Dollar (USD) as market expectations of a US interest rate hike took hold, with traders bracing for key economic reports and central bank decisions.
Britain's rate futures fully price four Bank of England hikes by the middle of next year, aligning with expectations of a US interest rate hike. The US Dollar strengthened against the British Pound on Wednesday, driven by these expectations. Traders are also awaiting the UK August Consumer Price Index (CPI) inflation report and the Federal Reserve's interest rate decision, scheduled for later in the day.
Markets are increasingly convinced that the Federal Reserve will hike the benchmark interest rate by 25 basis points at its September policy meeting in response to rising energy prices that have pushed underlying inflation higher than expected. Analysts predict that the Pound-US Dollar exchange rate will be at 1.3479 in one month, based on forward points being traded in currency markets.
According to reports, the US Consumer Price Index (CPI) data held at 3.4% year on year in August, matching both July's reading and market expectations. On a monthly basis, prices rose 0.4%, a marked increase from the 0.1% gain the month before. The core measure, which strips out food and energy, rose 0.3% on the month, above the 0.2% forecast, although the annual core rate eased to 2.4% from 2.5%. These factors are contributing to the strengthening of the US Dollar.
The Pound to Dollar exchange rate has retreated towards two-week lows around 1.3530 as a renewed global bond-market sell-off unsettled risk appetite and pushed UK borrowing costs to their highest levels since 2008. The Pound faces conflicting forces from the surge in gilt yields, with higher returns offering carry support while simultaneously reviving concerns over fiscal sustainability and the UK economic outlook. The Dollar lost ground on Monday, partly due to month-end position adjustments, but recovered on Tuesday, trading around 1.3530, close to two-week lows and near the key 1.3500 level.
What's confirmed
- Britain's rate futures fully price four Bank of England hikes by the middle of next year, aligning with expectations of a US interest rate hike. The US Dollar strengthened against the British Pound on Wednesday, driven by these expectations. Traders are also awaiting the UK August Consumer Price Index (CPI) inflation report and the Federal Reserve's interest rate decision, scheduled for later in the day.
- Markets are increasingly convinced that the Federal Reserve will hike the benchmark interest rate by 25 basis points at its September policy meeting in response to rising energy prices that have pushed underlying inflation higher than expected. Analysts predict that the Pound-US Dollar exchange rate will be at 1.3479 in one month, based on forward points being traded in currency markets.
- According to reports, the US Consumer Price Index (CPI) data held at 3.4% year on year in August, matching both July's reading and market expectations. On a monthly basis, prices rose 0.4%, a marked increase from the 0.1% gain the month before. The core measure, which strips out food and energy, rose 0.3% on the month, above the 0.2% forecast, although the annual core rate eased to 2.4% from 2.5%. These factors are contributing to the strengthening of the US Dollar.
- The Pound to Dollar exchange rate has retreated towards two-week lows around 1.3530 as a renewed global bond-market sell-off unsettled risk appetite and pushed UK borrowing costs to their highest levels since 2008. The Pound faces conflicting forces from the surge in gilt yields, with higher returns offering carry support while simultaneously reviving concerns over fiscal sustainability and the UK economic outlook. The Dollar lost ground on Monday, partly due to month-end position adjustments, but recovered on Tuesday, trading around 1.3530, close to two-week lows and near the key 1.3500 level.
What's still developing
- A currency pair prices the gap between what two central banks are expected to pay, not the level either sits at.
- Live GBP/USD exchange rate with intraday chart, daily statistics, forecasts and latest news.
- We'll email you when the Pound to US Dollar rate reaches your target.
- Know more. ) Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.
- In the daily chart, USD/JPY trades at 153.69, extending a corrective bearish phase with price lodged well below the 20-day Simple Moving Average (SMA) at 157.65 and the 100-day SMA at 159.68, which now frame a broad cap on any recovery attempts.
- The ATR of 0.0046 suggests low volatility, which may limit significant price movements in the short term.
- However, the recent price action shows a potential for a rebound towards the pivot.
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