With Expectations of a U.K. Rate Hike Fading, Can the Pound-Dollar Exchange Rate Recover to $1.36?

With Expectations of a UK Rate Hike Fading, Can the Pound-Dollar Exchange Rate Recover to $1.36?

28.08.2026 New

In the U.S. currency market the previous day, the U.S. dollar lacked direction despite the number of new unemployment insurance claims coming in lower than market expectations. The number of claims for the previous week came in at 203,000, below the market forecast of 208,000 and the previously revised figure of 207,000.The Dollar Index edged slightly higher to around 99.18 during New York trading hours, while the dollar/yen pair traded within a range of approximately 0.43 yen, between 159.11 and 159.54 yen, before closing near 159.32 yen.While the 159.50 yen level is seen as resistance, we will need to assess whether the range from 159.10 yen to the key 159.00 yen level will act as support.

European currencies fell as expectations for a Bank of England rate hike this year faded, causing the pound to decline against the U.S. dollar. The market is now pricing in a rate hike of approximately 24.7 basis points by December, down to a level that does not fully reflect a 25-basis-point hike.The pound traded within a range of about 33 pips, between 1.3570 and 1.3603, briefly hitting a low not seen in about a week before closing near 1.3592.The key level around $1.3600 is likely to act as resistance, while the level around $1.3570 is expected to serve as support.

Today's economic indicators include the release of France's preliminary August consumer price index at 3:45 p.m., with forecasts of a 0.7% month-over-month increase and a 2.4% year-over-year increase.At 21:30, Canada’s GDP for the April–June quarter and June GDP will be released; quarterly GDP is expected to come in at an annualized 3.4% quarter-over-quarter, while June GDP is expected to rise 0.2% month-over-month.At 10:45 p.m., the U.S. Chicago Purchasing Managers’ Index (PMI) for August is scheduled for release, followed at 11:00 p.m. by remarks from Fed Chair Warsh and the final reading of the University of Michigan Consumer Sentiment Index for August. We will be watching for fluctuations in the U.S. dollar and Canadian dollar in response to the Canadian GDP data and Chair Warsh’s remarks.