Modified: Wednesday, 23 September 2026 20:01 BST

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Falls as Strong US PMI Boosts Dollar

The Pound US Dollar (GBP/USD) exchange rate extended its recent decline on Wednesday, falling to its weakest level since late July as stronger US economic data reinforced expectations of further Federal Reserve tightening.

At the time of writing, GBP/USD was trading at around $1.3280, down roughly 0.5% on the day.

US Dollar (USD) Strengthens after Powerful US PMI Release

The US Dollar (USD) strengthened on Wednesday after the latest US business surveys pointed to unexpectedly strong economic momentum.

S&P Global’s flash composite PMI jumped to 58.4 in September from 56.0 in August, marking the strongest rate of private-sector expansion since July 2021.

The improvement was driven by strong growth across both services and manufacturing, while new orders increased sharply and hiring accelerated.

However, the survey also showed that stronger demand was putting renewed pressure on capacity and supply chains, contributing to another rise in business costs and selling prices.

The data reinforced expectations that the Federal Reserve may need to tighten monetary policy further following last week’s 25-basis-point interest-rate increase.

US Treasury yields moved sharply higher after the release, with the 10-year yield climbing above 5% to its highest level since 2007.

Recent Federal Reserve commentary has also remained hawkish.

Richmond Fed President Tom Barkin said that US economic conditions appeared to be firming and warned that inflation pressures were no longer confined to energy and tariff-related factors.

The combination of strong economic activity, persistent inflation and rising US yields helped underpin demand for the ‘Greenback’.

Pound (GBP) Pressured by Softer UK PMI Data

The Pound (GBP) came under additional pressure after the latest UK business surveys painted a much softer picture.

The flash services PMI fell to 51.7 in September from 52.5 in August, marking a three-month low and undershooting expectations for a reading of 52.0.

The composite PMI also fell to 51.7, indicating that overall private-sector growth slowed markedly during the month.

Although readings above 50 still signal expansion, the survey suggested that UK economic growth may have slowed towards only around 0.1% during the third quarter.

At the same time, inflationary pressures intensified.

Services companies reported the fastest increase in prices charged for four months, while input-cost pressures also accelerated following the recent increase in energy prices.

This leaves the Bank of England facing an increasingly difficult balance between slowing economic activity and persistent inflation.

The contrast with the US was particularly stark, with the US composite PMI at 58.4 compared with the UK’s 51.7.

Near-Term GBP/USD Forecast: Strong US Growth Leaves Pound Vulnerable

Looking ahead, GBP/USD may remain under pressure if the divergence between US and UK economic momentum continues.

The strong US PMI figures have increased expectations that the Federal Reserve could raise rates again in October, while UK data has raised fresh concerns over the strength of domestic growth.

For Pound Sterling, the $1.3250-$1.3280 area represents the immediate support zone.

A sustained break below this region could expose the $1.3200 level.

GBP/USD would need to recover above $1.3350 to ease the immediate downside pressure.

Thursday’s meeting between US President Donald Trump and Chinese President Xi Jinping will also attract considerable market attention.

Any deterioration in US-China relations could further support the safe-haven Dollar, while signs of progress on trade could improve global risk appetite and offer Sterling some relief.

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TAGS: Pound Dollar Forecasts