Modified: Thursday, 15 October 2026 12:36 BST

– Written by


Frank Davies

STORY LINK Pound-to-Dollar Forecast: GBP/USD Bounces as US Treasury Yields Retreat

The Pound to Dollar exchange rate (GBP/USD) rebounded towards 1.3250 after falling to 16-week lows near 1.3160 following hotter-than-expected US inflation data.

Stronger UK GDP and a retreat in US Treasury yields helped Sterling recover, although persistent underlying US price pressures have reinforced expectations of further Federal Reserve tightening.

GBP/USD Forecasts: Rebound from 16-Week Lows

The Pound to Dollar (GBP/USD) exchange rate rebounded strongly on Thursday after sliding to 16-week lows following hotter-than-expected US inflation data.

GBP/USD had fallen close to 1.3160 after Wednesday’s CPI release, but recovered towards 1.3250 as US Treasury yields retreated and the Dollar surrendered part of its post-inflation gains.

The stronger Pound was also supported by unexpectedly resilient UK growth data.

According to UoB, the recent recovery remains fragile; “To sustain the momentum, GBP must hold above 1.3230.”

The 2026 low around 1.3140 remains an important downside level, with a sustained break potentially increasing the risk of a move towards 1.3000.

US consumer prices increased sharply in September, reinforcing expectations that the Federal Reserve will tighten policy again before the end of the year.

Headline CPI increased 0.6% on the month, while the annual inflation rate accelerated to 3.7% from 3.4%, above consensus forecasts of 3.6%.

The increase was driven partly by a 7.1% monthly jump in gasoline prices.

Core prices rose 0.3% on the month, compared with expectations of 0.2%, while the annual core rate increased to 2.6% from 2.4%.

The figures triggered an immediate surge in US Treasury yields and broad Dollar gains.

Markets raised the probability of an October Federal Reserve hike sharply following the release, although pricing subsequently moderated as bond yields retreated.

A December increase remains much more firmly priced.

Schroders senior economist George Brown commented; “While energy prices might be grabbing the headlines, today’s report suggests the inflation problem runs much deeper.”

He added; “A stronger-than-expected core inflation reading adds to mounting evidence that domestic price pressures are becoming more entrenched, rather than easing.”

ING currently expects the Federal Reserve to wait until December before increasing rates again, although it sees risks skewed towards additional tightening if inflation remains elevated.

MUFG is also cautious over extrapolating the latest rise in prices into a prolonged tightening cycle.

The bank commented; “We remain sceptical that inflation pressures will continue to build and while we expect the Fed to hike again in December, we do not expect the Fed to deliver the two further rate hikes currently priced by the markets.”

Pound Sterling received an additional boost on Thursday after the latest UK growth figures exceeded expectations.

UK GDP increased by 0.1% in August compared with forecasts for a 0.1% contraction.

Annual growth accelerated to 2.1%, while manufacturing output increased sharply during the month.

The data provided some reassurance that the UK economy is proving more resilient than feared despite elevated energy prices and borrowing costs.

The Pound also benefited from the retreat in US Treasury yields as investors moved into government bonds amid renewed weakness in global technology stocks.

The Dollar consequently gave back part of Wednesday’s CPI-driven advance.

For GBP/USD, the 1.3230-1.3250 region is now the immediate technical area to watch.

A sustained recovery above 1.3275 would improve the short-term outlook and could bring 1.3300-1.3350 back into focus.

Conversely, renewed Dollar buying would expose 1.3200 followed by the 2026 low around 1.3140.

The wider direction will remain highly sensitive to US rate expectations, with upcoming retail-sales and producer-price data likely to determine whether Wednesday’s inflation shock produces another sustained rise in Treasury yields.

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TAGS: Pound Dollar Forecasts