GBP/USD Falls Amid Expectations of October Fed Rate Hike

The GBP/USD pair continues to struggle at three-month lows, weighed down by strong expectations of a Federal Reserve rate hike in October. The pound remains under pressure due to growing inflation risks and heightened demand for the US dollar as a safe-haven asset.

Negotiations to resume full operations at the Strait of Hormuz have stalled, further supporting the case for a Fed rate hike. Markets estimate that there is over an 80% chance of a 25 basis point Bank of England rate hike in November, with approximately four increases already priced in by mid-2027.

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, aligning with recent warnings from Andrew Bailey.