Sterling Under Pressure: GBP/USD, EUR/USD & GBP/EUR Market Outlook

Key Highlight

• US growth is pulling further ahead. The US composite PMI rose to 58.4, its strongest level since July 2021 and well above the 55.3 expected. The eurozone also improved to 53.1, a three-year high, while the UK slipped to 51.7, a three-month low.
• Sterling came under renewed pressure. The pound was the weakest G10 currency against the dollar, falling to its lowest level since early July. The euro also weakened against the dollar, reaching its lowest level since late July.
• US yields jumped sharply. Fed Governor Barr indicated that further tightening may be required, sending the US 10-year yield 15 basis points higher to 5.11%. This strengthened the dollar and increased pressure on both Sterling and the euro.
• Oil remains a key inflation risk. Brent crude stayed above $100 as progress towards a US Iran peace agreement remained elusive, adding further pressure to European bond markets.

Market Recap

The latest data has created a clear divergence between the major economies. US activity is accelerating, the eurozone is showing signs of recovery, while UK growth is losing momentum. At the same time, UK price pressures remain elevated, with the Budget and higher energy costs adding to the economic challenges.

Markets are currently pricing around an 87% probability of a November BoE rate hike and approximately a 65% probability of an October Fed hike. However, Citi has joined Deutsche Bank in taking the view that further BoE rate hikes may not materialise.

Australia also provided a mixed picture. Unemployment unexpectedly increased in August despite stronger than expected employment growth. The Australian dollar subsequently moved below its 200-day average for the first time since November, adding uncertainty ahead of next week's expected RBA decision.

Market Overview

The latest PMI figures have reinforced the current growth divide. The stronger US economy, combined with rising Treasury yields and expectations of further Fed tightening, continues to provide support for the dollar.

For GBP/USD, sterling remains under pressure despite expectations of another BoE hike. The pound is deeply oversold, but the sharp rise in US yields means any recovery could face resistance. US jobless claims are today's key data point, particularly following the strength of the latest US PMIs.

Against the euro, the outlook is more balanced. Stronger eurozone growth supports the single currency, while UK interest rate expectations provide some support for sterling. This leaves GBP/EUR more rangebound, with upcoming economic data and the UK Budget likely to influence the direction.

For businesses buying or selling currencies, the current environment highlights the importance of timing and managing exposure rather than relying solely on central bank expectations. Dollar movements remain particularly sensitive to US economic data and Treasury yields, while GBP/EUR could remain more mixed.

What This Means for Your Currency Payments

GBP/USD: The current environment continues to favour dollar strength, with sterling facing pressure from the widening growth gap and higher US yields. For businesses needing to buy dollars, current levels may be worth considering rather than assuming a significant sterling recovery. Dollar sellers should also consider securing a proportion of their requirements while rates remain favourable.

EUR/USD: The dollar retains an interest rate advantage, while the eurozone's improving growth picture provides some counterbalance. This leaves the euro vulnerable if US data continues to outperform expectations.

GBP/EUR: The outlook is less directional. UK rate expectations support sterling, while stronger eurozone growth provides support for the euro. With volatility relatively subdued, businesses may wish to focus on their required rate and payment deadline rather than trying to predict every market movement.

Bottom line: The latest data has strengthened the case for continued dollar support, while the pound faces a more challenging backdrop. For USD requirements, managing exposure in stages can help reduce the risk of relying on a single market level. GBP/EUR remains more balanced, making a structured approach particularly relevant around key economic announcements.

24th September 2026

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