FX Market Outlook: Fed, Bank of England, US Inflation and GBPUSD Forecast

Market temperature: Elevated 

• Markets remain particularly sensitive today following a hawkish Federal Reserve decision and fresh US strikes on Iran. The Fed kept interest rates unchanged for a seventh consecutive meeting, although three officials argued for an immediate rate increase, keeping the possibility of a September hike firmly in focus. 

• Attention now turns to the Bank of England and US economic data. The BoE decision is due around midday, followed by US growth and inflation figures at 13:30. With geopolitical tensions also supporting oil prices above $90 a barrel, today's releases could create larger than usual movements across sterling and dollar pairs. 

Market Recap 

The dollar weakened broadly following the Fed's decision, despite the increasingly hawkish tone. GBPUSD gained 0.61% while EURUSD rose 0.70%, providing a temporary improvement for businesses purchasing dollars. 

The reaction was more pronounced across Australian dollar markets. GBPAUD increased 0.87%, making it the strongest G10 currency move of the day. For a £250,000 transaction, buying Australian dollars is now approximately £2,175 cheaper than before the move. 

Geopolitical developments are adding another layer of uncertainty. Fresh US strikes on Iran have helped keep oil above $90 a barrel, increasing concerns around inflation while also providing the dollar with some safe haven support. 

Norwegian krone moved in the opposite direction, with GBPNOK falling 0.44% as higher oil prices supported the currency. For a £250,000 transaction, buying Norwegian krone is approximately £1,100 more expensive. 

Market Overview 

Euro vs Dollar 

Near term: 50% conviction for dollar strength 

EURUSD remains within the trading range established since June, with yesterday's dollar weakness taking the pair towards the upper end of that range. 

The key test comes with US inflation data at 13:30. A softer than expected reading could allow the euro's recent gains to continue, while stronger inflation would increase expectations of higher US rates and potentially push the dollar higher. 

The escalation between the US and Iran also creates additional safe haven demand for the dollar, which could limit further euro gains. 

Medium term: 70% conviction for dollar strength 

The broader outlook continues to favour the dollar. The relative strength of the US economy compared with the eurozone remains an important driver, while the possibility of the Fed raising rates in September would further support the dollar given that US rates are already considerably higher than those in the eurozone. 

A significant deterioration in US economic growth would be needed to challenge this view. 

What this could mean for you 

If EURUSD falls towards its June low, buying $250,000 would cost approximately £3,100 more, while businesses selling dollars would benefit by a similar amount. 

If the pair reaches the upper end of its current range, buying dollars would cost approximately £1,900 less. This resistance level is closer than the June low, meaning dollar sellers could face the first impact if the pair continues higher. 

Pound vs Dollar 

Near term: 50% conviction for pound weakness 

Sterling's recent gains have started to moderate. The pound strengthened sharply on Wednesday before giving back some of that move overnight ahead of today's BoE decision. 

Although the Bank of England's decision remains important, the US growth and inflation figures at 13:30 are likely to have the greater influence on GBPUSD. Softer US inflation could support sterling, while a stronger reading could quickly reverse yesterday's dollar weakness. 

A more hawkish than expected BoE vote could also provide a significant boost to the pound. 

Medium term: 60% conviction for pound weakness 

The medium term picture remains challenging for sterling. The pound has not yet recovered its July high, while the narrowing difference between UK and US interest rates means the rate differential is providing less support. 

The stronger pace of US economic growth remains the key factor weighing on sterling. A September rate increase from the Fed could reinforce that advantage. 

A meaningful improvement in UK growth would be needed to alter this outlook. 

What this could mean for you 

If GBPUSD falls towards its 2026 low, buying $250,000 would cost approximately £3,870 more. Dollar sellers would benefit by the same amount. 

If sterling recovers towards the May and June resistance area, buying dollars would cost approximately £3,550 less, creating a relatively balanced range of potential outcomes. 

Pound vs Euro 

Near term: 40% conviction for pound strength 

GBPEUR has remained largely range-bound over the past two sessions, with both currencies responding to movements in the dollar. 

Eurozone growth data at 10:00 and the Bank of England's vote split at midday are the main events capable of breaking this current period of stability. 

A stronger eurozone economic reading could favour the euro, while a more hawkish BoE vote could support sterling. 

Medium term: 60% conviction for pound strength 

The wider trend continues to favour sterling, with GBP gaining against the euro since May. 

Higher UK interest rates and stronger UK growth compared with the eurozone remain the main reasons for this strength. However, a prolonged oil price shock could create complications for the UK economy and potentially force the BoE to keep rates higher for longer. 

What this could mean for you 

If GBP falls towards support, buying €250,000 would cost approximately £685 more. 

If sterling reaches its 2026 high, buying euros would cost approximately £3,520 less. The size of this potential range means euro sellers have considerably more exposure to a stronger pound than buyers have to a weaker one. 

Other Currency Moves 

GBPAUD +0.87% 

The Australian dollar was one of the biggest G10 movers, with GBPAUD rising 0.87%. Buying A$250,000 is now approximately £2,175 cheaper, while Australian dollar sellers are worse off by the same amount. 

GBPNOK −0.44% 

The Norwegian krone strengthened as oil prices remained above $90 a barrel. Buying NOK250,000 is approximately £1,100 more expensive, while Norwegian krone sellers benefit by the same amount. 

What This Means for Businesses 

The main event for FX markets today is likely to be the US economic data at 13:30, rather than the Bank of England decision, where a hold is widely expected. 

A softer US inflation figure could extend the dollar's recent weakness and provide a better opportunity for businesses buying dollars. A stronger inflation reading could have the opposite effect, potentially reversing some of yesterday's currency moves. 

With the Fed signalling that a September rate increase remains possible and geopolitical tensions keeping oil prices elevated, today's market could remain volatile. Businesses with upcoming international payments should therefore be prepared for potentially rapid currency movements around the data releases. 

30th July 2026 

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