GBP/USD + GBP/EUR Market Update

FOMC and MPC Double-Barrel Risk Pins GBP/USD Above 1.3490 as EUR/USD Steadies Near 1.1545, Monday, 14 September 2026

GBP/USD: 1.3493 | GBP/EUR: 1.1687 | EUR/USD: 1.1545

GBP/USD is consolidating above the 1.3500 psychological mark at the start of a new week, struggling to extend Friday's bounce from the vicinity of the monthly swing low. During the Asia session this morning, markets were driven by a renewed surge in oil prices, rising inflation concerns, and growing expectations that the Federal Reserve could tighten monetary policy this week, keeping risk appetite subdued. The week's dominant events are Wednesday's FOMC decision and Thursday's MPC announcement, with UK employment data (Tuesday) and UK CPI (Wednesday) providing the last domestic inputs before the BoE votes.

Overnight & Market Tone:

Asia trade was characterised by a risk-off tone, with equities - particularly technology and semiconductor shares - moving lower, while crude oil gained strongly. Rising Fed rate-hike expectations and Middle East tensions are underpinning the dollar, capping GBP/USD. GBP is up against most major currency peers at the London open, with the exception of North American currencies. Brent crude futures opened today at $106.74 per barrel, sustaining the inflationary backdrop that has driven the repricing of central bank policy across the G7. Gulf Cooperation Council diplomats are expected to meet their Iranian counterpart today to discuss a possible temporary arrangement for managing shipping through the Strait of Hormuz, a development that could introduce intraday volatility in energy prices and risk sentiment. The VIX closed last week at elevated levels consistent with the multi-day equity sell-off, and gilt and Treasury yields remain near cycle highs.

UK Data & Bank of England:

This is the most data-dense week of the UK calendar ahead of an MPC decision. The ONS UK Labour Market release is due tomorrow, 15 September, at 7.00am. UK CPI for August follows on Wednesday, 16 September, also at 7.00am, landing just hours before the FOMC statement and one day before the MPC votes. The CPI release is the single most important UK inflation reading of the month and lands one day before the Bank of England's MPC is next scheduled to meet.

The BoE context is finely balanced. Bank Rate currently stands at 3.75%, where it has been held since the committee cut it from 4% on 18 December 2025. The Bank's July central projection showed CPI inflation peaking at around 3.2% in 2026 Q4, with the MPC noting that "risks to the inflation outlook are tilted to the upside." Governor Bailey's remarks at Jackson Hole indicated the Committee remains likely to hold Bank Rate steady at 3.75% at the September meeting, even if a few hawkish dissenters are again likely. Chief economist Huw Pill has said he is "uncomfortable with a wait-and-see stance" from fellow policymakers, signalling the vote split will be watched closely. OIS markets currently imply a move of approximately +7bp at the 17 September meeting, consistent with a roughly 28% probability of a 25bp hike and a 72% probability of a hold. A hotter-than-expected CPI print on Wednesday morning could shift that pricing materially before the noon decision.

European Backdrop & EUR/USD:

The ECB raised its deposit facility rate by 25bp to 2.50% on 10 September 2026, with the new rates effective 16 September. President Lagarde described the decision as unanimous and straightforward, while stressing that policy will be set meeting by meeting and that the Governing Council is not pre-committing to any rate path. Headline inflation is now expected to average 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028; the 2027 and 2028 estimates were revised higher from 2.3% and 2.0% respectively. The ECB's next monetary policy decision is on 29 October. With no ECB speakers scheduled today and the Governing Council in its customary pre-meeting quiet period, EUR-area macro inputs this week are limited to Eurostat's full August HICP release on Thursday.

For EUR/USD specifically, the pair has retreated from the post-ECB highs above 1.1640 seen earlier in the week. EUR/USD dipped below 1.1600 on the ECB news 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 has since slipped further to 1.1545 as the hot US CPI print on Friday reinforced dollar demand. US inflation remained stubbornly hot in August, with the CPI rising 3.4% year-over-year and 0.4% month-on-month, with gasoline driving more than one-third of the monthly increase. The ECB-Fed rate differential has narrowed sharply: with the ECB deposit rate at 2.50% and the Fed funds upper bound potentially moving to 4.00% on Wednesday, the policy gap would widen to 150bp in the dollar's favour, a structural headwind for EUR/USD. Treasurers with direct EUR/USD exposures should note that the pair is now trading at the lower end of its September range (1.1545-1.1640) and a confirmed Fed hike without a hawkish ECB offset could push the pair toward 1.1480-1.1500.

US Backdrop:

US inflation remained stubbornly hot in August, with the CPI rising 3.4% year-over-year and 0.4% month-on-month, cementing expectations for this week's FOMC. After Friday's CPI release, the likelihood of a rate hike at the 16 September meeting jumped to 90%, up from 70% the previous day, according to CME FedWatch. Chairman Warsh has expressed a commitment to returning inflation to the 2% target and said recently that if the numbers don't improve "we have work to do," comments widely interpreted as advocating a hike, though several officials have counselled a more patient approach. The FOMC meeting begins tomorrow (15 September), with the rate decision and press conference due at 19.00 London time on Wednesday. There is no significant US data scheduled today; the market will trade on positioning and Middle East headlines ahead of the decision.

Technical Picture:

GBP/USD: Resistance at 1.3522 (Friday's high), then 1.3554 (10 September high) and 1.3600 (round number). Support at 1.3490 (current spot/session low), 1.3470 (monthly swing low area) and 1.3430.
GBP/EUR: Resistance at 1.1710 (recent range top) and 1.1750. Support at 1.1650 (last week's close), 1.1600 (round number) and 1.1570.
EUR/USD: Resistance at 1.1600 (broken support, now cap), 1.1640 (post-ECB high) and 1.1680. Support at 1.1520 (September range low), 1.1480 and 1.1450.
Outlook: GBP/USD and EUR/USD are both biased lower into Wednesday's FOMC, with the dollar holding the initiative on near-90% hike pricing; a confirmed 25bp move without a materially hawkish dot-plot overshoot could see a "buy the rumour, sell the fact" reversal that partially retraces the dollar's recent gains, but the primary risk ahead of Thursday's MPC remains to the downside for both pairs.

Today's Calendar:

Today is data-light for the UK, but the GCC-Iran diplomatic meeting on Strait of Hormuz shipping arrangements is the primary intraday risk event; any sign of a temporary arrangement could push Brent sharply lower and partially relieve the inflation-driven dollar bid, offering a brief window of GBP/USD and EUR/USD recovery.

Outlook:

GBP/USD is likely to remain range-bound between 1.3470 and 1.3540 ahead of Wednesday's FOMC, with the dollar holding a modest structural advantage on near-90% hike pricing; a confirmed 25bp move accompanied by a hawkish dot-plot revision could push the pair toward 1.3430, while a hold or dovish guidance surprise would likely trigger a sharp relief rally back toward 1.3600. EUR/USD faces a similar binary, with the additional complication that a wider Fed-ECB rate gap (150bp if the Fed hikes) removes a key pillar of euro support, making 1.1480 a credible downside target on a hawkish FOMC outcome, while GBP/EUR may prove more resilient given the BoE's own hawkish dissent risk on Thursday.

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.