GBP/USD + GBP/EUR Market Update

Oil Shock and Fed Hike Certainty Drive GBP/USD to Five-Week Lows as EUR/USD Slips to 1.1536, Tuesday, 15 September 2026

GBP/USD: 1.3480 | GBP/EUR: 1.1681 | EUR/USD: 1.1536

The US dollar has gathered strength to a near two-week high around 99.60 in early European trading on Tuesday, as Brent crude stood at approximately $107 per barrel, having gained more than 1% on fears of energy supply shortages following the attack on Saudi oil facilities and ongoing Middle East tensions. GBP/USD has weakened to around 1.3470, its lowest since 7 August, while EUR/USD fell to 1.1536, down 0.11% from the previous session. The three key risk events for the next 48 hours are tomorrow's ONS CPI print at 07.00am, the FOMC decision at 19.00pm London time, and Thursday's MPC announcement at 12.00pm.

Overnight & Market Tone:

GBP/USD tested five-week lows of 1.3464 overnight and trimmed some of those losses, remaining in the red, down around 0.23%, amid a light domestic data docket as both the UK and US central banks prepare for their respective policy decisions. Risk sentiment is cautious to negative: the UK stock market is expected to be highly volatile on Tuesday amid concerns about sharp spikes in oil prices, bond yields, and geopolitical risks, with the FTSE 100 having closed Monday up 0.4% at 10,697.57, supported by defensive and energy stocks, while the FTSE 250 fell 0.6% to 23,834.48. The 10-year US Treasury yield briefly touched 5% on Monday as stocks slid, and US Treasury yields are holding near multi-year highs as Fed hike bets anchor the curve. The gilt market is tracking Treasuries higher in yield, compressing duration appetite across the board and keeping risk assets on the back foot.

UK Data & Bank of England:

Today's UK calendar is light ahead of the critical double-barrel of data and policy this week. The ONS will publish the Consumer Price Inflation bulletin for August 2026 tomorrow, Wednesday 16 September, at 07.00am BST. UK inflation has been drifting away from the Bank of England's 2% target: after falling to a 15-month low of 2.6% in June, headline CPI rose to 2.9% in July, and the Bank has projected inflation could peak near 3.2% in the fourth quarter of 2026. Core CPI was 2.6% in July, unchanged from June, while services inflation eased to 3.4% from 3.6% - the latter figure will be scrutinised closely by the MPC given its sensitivity to domestic cost pressures. UK inflation is expected to heat up again in August, keeping another BoE rate hike on the table, and a surprise in either direction could send sterling moving, with the broader risk mood shaping which GBP pairs react most strongly. With the FOMC decision arriving 12 hours later, any CPI-driven move may have a short shelf life. On the MPC, the Bank held Bank Rate at 3.75% on 30 July in a divided 6-3 vote, with three policymakers wanting a rise to 4.00%. The three dissenters - Megan Greene, Catherine Mann and Huw Pill - each preferred a 0.25-point rise to 4.00%, representing one more hawkish dissent than June's 7-2 and two more than April's 8-1: the minority pushing for higher rates has grown at three meetings running. All 65 economists in a Reuters poll conducted 4-8 September expected the MPC to hold on 17 September, while SONIA pricing compiled by BlueGamma implied a five-basis-point increase for the meeting, equivalent to roughly 20% odds of a full 25bp hike - though as of 14 September, OIS pricing implied a 55% probability of a hold, with a market-implied move of +11bp from the current Bank Rate of 3.75%. UBS expects the majority of the committee to favour holding rates, citing tighter financial conditions and the absence of second-round effects, but expects the MPC to flag greater upside risks to its inflation projection compared with July. The September meeting does not carry a Monetary Policy Report; the next full forecast round lands with the 5 November decision.

European Backdrop & EUR/USD:

The ECB raised its key interest rates by 25bp at its September meeting on 10 September, marking its second hike since the Middle East conflict began; the ECB said the conflict continues to fuel inflationary pressures, with inflation expected to remain well above its 2% target for an extended period. The main refinancing rate was raised to 2.65% and the deposit rate to 2.50%. Inflation forecasts for 2027 and 2028 were revised up to 2.5% and 2.1%, while growth was upgraded to 0.9% in 2026 and 1.4% in 2027. ECB President Lagarde cited broad-based second-quarter growth, with manufacturing supported by defence and infrastructure spending, recovering consumer confidence, and AI-related momentum in digital services and exports. The next ECB decision is 29 October, leaving EUR/USD to trade primarily on the Fed-MPC cross-current this week. EUR/USD is under clear pressure this morning, having fallen to 1.1536 on 15 September, down 0.11% on the session, and having weakened 0.38% over the past month. EUR/USD dipped below 1.1600 on the ECB decision news last week and steadied near 1.1610, with the hike already fully priced; markets now price more tightening than the ECB's own baseline requires, leaving the euro's rate support exposed. The pair's near-term direction is almost entirely a function of the Fed: markets now price more tightening than the ECB's own baseline requires, and the next tests are the Fed decision on 16 September and the ECB on 29 October. With the ECB deposit rate at 2.50% and the Fed target range set to move to 3.75%-4.00% if tomorrow's hike is delivered, the rate differential widens further in the dollar's favour, providing a structural headwind for EUR/USD. The euro has held around $1.16, near its weakest level in more than a week, as the dollar remained supported by growing expectations that the Federal Reserve will raise interest rates, following hotter-than-expected US core inflation data. Treasurers with direct EUR/USD exposures should note that a confirmed 25bp Fed hike tomorrow could push the pair toward the 1.1480-1.1500 zone, while any dovish surprise in the FOMC statement or dot plot could see a relief rally back toward 1.1600.

US Backdrop:

The FOMC's two-day meeting began today, concluding tomorrow at 14.00 Eastern (19.00 London) with the central bank's latest policy decision; with the labour market steady and energy prices keeping inflation elevated, it is widely expected that the Federal Reserve will vote to raise the federal funds rate for the first time since 2023. According to CME FedWatch, futures traders are pricing a 93% chance the FOMC will raise the federal funds rate by 25bp, to a target range of 3.75% to 4.00%. This is also a Summary of Economic Projections meeting, meaning the Fed's updated dot plot will land alongside whatever decision it makes - the dot plot's signal on the December meeting will be the primary driver of any post-decision USD move. Fed Chairman Kevin Warsh has recently taken a hawkish stance, highlighting "concerning" inflation figures, with the PCE index at 3.7% and 4.1% over 12 and 6 months respectively, well above the 2% target.

Technical Picture:

GBP/USD: Resistance at 1.3510 (yesterday's high), then 1.3545 (last week's range top) and 1.3600 (round number). Support at 1.3464 (overnight low, five-week trough), then 1.3420 and 1.3380.
GBP/EUR: Resistance at 1.1710 (Monday's open), then 1.1750 and 1.1800. Support at 1.1650 (intraday), then 1.1620 and 1.1580.
EUR/USD: Resistance at 1.1570 (Monday's close), then 1.1610 (post-ECB stabilisation level) and 1.1650. Support at 1.1520 (intraday), then 1.1490 and 1.1450.
Outlook: GBP/USD is testing the lower boundary of its August-September range with momentum firmly to the downside ahead of the FOMC; a confirmed 25bp hike and hawkish dot plot tomorrow could extend losses toward 1.3420, while EUR/USD faces a similar trajectory toward 1.1480 unless the Fed's forward guidance disappoints the market's aggressive pricing.

Today's Calendar:

With the FOMC meeting underway and no tier-one UK data due until tomorrow's ONS CPI at 07.00am, today's session is likely to be characterised by position-squaring ahead of the most consequential 48-hour window of the month; any upside surprise in US Retail Sales this afternoon could add further near-term dollar support.

Outlook:

GBP/USD and EUR/USD are both biased lower into tomorrow's FOMC decision, with the near-certainty of a 25bp Fed hike already largely priced but the dot plot's December signal carrying genuine surprise potential in either direction. For sterling specifically, the sequence matters: a hot ONS CPI print at 07.00am tomorrow could briefly lift GBP/USD before the FOMC overwhelms it by evening, and then Thursday's MPC announcement at 12.00pm will determine whether sterling can recover any ground - a shift to a 5-4 or 4-5 vote (hold versus hike) would be the most sterling-positive outcome, while a repeat of the July 6-3 hold with unchanged guidance risks a fresh leg lower toward 1.3420.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions.