– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Hits Two-Month Low as UK Borrowing Surges

The Pound US Dollar (GBP/USD) exchange rate came under renewed pressure on Tuesday, briefly falling to its weakest level since late July as markets digested the latest UK public borrowing figures.

At the time of writing, GBP/USD was trading around $1.3364. The pairing remained slightly below Tuesday’s opening levels, although it had recovered somewhat from the near two-month low reached earlier in the session.

Sterling struggled on Tuesday after official figures revealed a sizeable increase in UK government borrowing, prompting fresh concerns about the limited fiscal room available to Chancellor John Healey ahead of next month’s Budget.

Data from the Office for National Statistics (ONS) showed that public sector net borrowing climbed to £18.3bn in August.

The figure was significantly higher than the £15.7bn anticipated by economists.

The larger-than-forecast deficit adds to the financial pressures facing the government and leaves Healey with less room for manoeuvre as he prepares to deliver his first Budget next month.

The US Dollar (USD) initially strengthened on Tuesday as a cautious market mood and expectations of a hawkish Federal Reserve encouraged demand for the safe-haven currency.

However, the ‘Greenback’ subsequently surrendered most of its earlier gains following reports that Iran could be prepared to reopen the Strait of Hormuz if the US takes steps to ease military pressure.

The prospect of a reopening prompted a sharp reaction across energy markets, with Brent crude slipping below $100 per barrel for the first time in two weeks.

Lower oil prices could ease some of the inflationary pressure currently facing major economies, reducing expectations for further monetary tightening.

That said, the improvement in market sentiment remained relatively limited.

Any reopening of the Strait remains conditional, while there has so far been little indication that Washington is prepared to agree to Tehran’s demands.

Near-Term GBP/USD Forecast: UK PMIs Could Set the Tone

Attention now turns to Wednesday’s preliminary UK PMIs, which could provide the next significant catalyst for the Pound US Dollar (GBP/USD) exchange rate.

Markets are expecting activity across both the manufacturing and services sectors to lose some momentum in September as the third quarter draws to a close.

Should the figures confirm a broader slowdown in private-sector activity, Sterling could come under additional pressure.

Signs of weaker domestic growth may reinforce expectations that the Bank of England (BoE) will maintain a cautious approach to interest rates, limiting support for the Pound.

Meanwhile, the latest US S&P PMIs are also due on Wednesday afternoon.

Although they typically attract less attention than the ISM surveys, evidence that the US private sector remains resilient could bolster expectations for tighter Fed policy and lend further support to the US Dollar.

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TAGS: Pound Dollar Forecasts

2026.09.22 2026.09.22
Yen Slides as BoJ Hesitates. Forecast as of 22.09.2026

Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/

If the US Treasury pushes the Bank of Japan to raise interest rates aggressively while Sanae Takaichi’s government fuels dissent within the BoJ’s policy-making ranks, breaking the USD/JPY uptrend could prove difficult. Let’s analyze the situation and develop a trading plan.

Major Takeaways

• The Bank of Japan raised its overnight rate to 1.25%.
• Dissenting Board of Governors members caused the yen to fall.
• The derivatives market does not believe the cycle will continue in October.
• Long positions can be opened with targets of 158.35 and 159.4.

Weekly Fundamental Forecast for Yen

What driver enjoys having two passengers in the back seat telling him how to drive? It’s even more frustrating when those passengers want to go in different directions. Treasury Secretary Scott Bessent is calling on the Bank of Japan to pursue aggressive monetary tightening to reverse the USD/JPY uptrend. Prime Minister Sanae Takaichi, however, opposes a sharp rate hike. Combined with rising borrowing costs, such a move could risk pushing the Japanese economy back into stagnation.

For the yen to strengthen, the market needed forceful hawkish rhetoric—not the vague signals from Kazuo Ueda, which have made it difficult to determine where the current tightening cycle might end or how quickly it will proceed. Two dissenting voices on the BoJ’s policy board have compounded the uncertainty. Speculators who had been betting on the government’s policy stance were forced to unwind their net-long positions in the Japanese yen since July 2025. As a result, the USD/JPY surged higher.

Changes in Hedge Funds’ Yen Positions

Source: Bloomberg.

The government did not even have to intervene directly in the foreign exchange market to push the US dollar to its lowest level against the yen since early February. Hedge funds were so concerned about the prospect of Japanese investors repatriating some of the more than $5 trillion they hold in foreign assets that they rushed to sell the USD/JPY. The logic was straightforward: raising the overnight rate to 1.25%—its highest level since 1995—could make domestic assets more attractive and encourage Japanese investors to bring money back home.

Foreign Assets Held by Japanese Investors

Source: Wall Street Journal.

However, for domestic investors, led by the GPIF, to repatriate their overseas holdings and strengthen the yen, the BoJ would need to pursue a transparent and aggressive tightening cycle. Instead, the central bank has acted too late and too cautiously. According to the Bank of Nassau, if the BoJ truly wanted to reverse the USD/JPY uptrend, it should have raised the overnight rate by 50 basis points rather than 25 and then followed up with aggressive currency-market intervention.

As things stand, two dissenting voices on the policy board and Kazuo Ueda’s vague rhetoric have left the derivatives market pricing in only a 20% probability of another BoJ rate hike in October. Under these circumstances, how could USD/JPY fall? Instead, the pair could come under renewed upward pressure, fueling speculation that Japan’s relatively low inflation rate means the central bank is unlikely to tighten monetary policy as aggressively as its global peers.

If that proves to be the case, UBS argues that any new government intervention in the currency market could actually become a reason to sell the yen. For hedge funds, it may be time to return to the bear camp.

Weekly USDJPY Trading Plan

Long positions opened at 154.4 and increased following the Fed and Bank of Japan meetings appear to have been well timed. Pullbacks could provide opportunities to add to long positions on the USD/JPY, with targets at 158.35 and 159.4.

This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.

Price chart of USDJPY in real time mode

The U.S. 2-year yield is starting to drop a bit early in Tuesday’s trading session. That being said, I think this is simply a matter of the market being a little stretched. That could lead to a little bit of U.S. dollar weakness and a little bit of risk appetite out there, so we’ll have to wait and see how this plays out.

GBPJPY attempted to renew pressure on the resistance level at 210.40, with the pair currently attempting to hold above it and stabilizing around 210.80, increasing the chances of resuming the bullish bias. We emphasize the importance of a positive four-hour close above the breached level to confirm its readiness to record further gains, potentially extending toward 211.25 and 212.05, respectively.

However, failure to confirm the breakout would push the pair into mixed trading before attempting to renew the bearish moves, targeting 209.15 and then the additional support near 208.10.

The expected trading range for today is between 209.90 and 211.25

Trend forecast: Bullish

EURJPY returned to fluctuate near the resistance level at 181.80 amid continued conflicting signals from the main indicators, particularly as stochastic remains near the 80 level, limiting the chances of forming the previously suggested bearish trades.

Holding below the current resistance keeps the bearish scenario valid, with the pair expected to gather negative momentum, allowing it to begin targeting the bearish levels by moving first toward 179.45 and 178.60, respectively. However, breaking above the resistance and holding above it would invalidate the bearish outlook and give the pair an opportunity to target several positive levels, initially at 181.60 and 182.05.

The expected trading range for today is between 179.45 and 180.90.

Trend forecast: Bearish