By Boluwatife Oshadiya | September 3, 2026
Key Points
- Sterling is holding around $1.35 against the US dollar as a softer greenback supports the pound
- Markets are assessing the potential impact of Federal Reserve Chair Kevin Warsh’s hawkish inflation stance on US interest rates
- Bank of England Governor Andrew Bailey is due to speak on September 4, ahead of the next UK monetary policy decision on September 17
Main Story
The British pound is holding around $1.35 against the US dollar as a weaker greenback provides support, while investors assess monetary-policy signals from the Federal Reserve and Bank of England.
Reuters reported on September 3 that sterling was up about 0.1% at $1.35 after falling to a three-week low of $1.348. The move came as the dollar weakened alongside a rally in the Japanese yen, while easing oil prices reduced some pressure on global markets.
The pound’s immediate outlook remains closely linked to expectations for US interest rates. Federal Reserve Chair Kevin Warsh recently signalled that the central bank could raise rates if inflation does not show sufficient progress towards its 2% target. Markets have subsequently increased their expectations of a September rate hike.
Current market pricing places the probability of a September Federal Reserve rate increase at roughly 65%, according to Reuters’ report on the latest Federal Reserve Beige Book and market expectations.
“We will have work to do if we are not confident that underlying inflation is clearly heading towards 2%,” Warsh said at the Jackson Hole symposium, signalling that persistent inflation could warrant tighter monetary policy.
In the UK, sterling is also responding to expectations surrounding the Bank of England. The central bank’s latest scheduled events show Governor Andrew Bailey is due to deliver a keynote speech on September 4, while the next Monetary Policy Summary and minutes are scheduled for September 17.
The competing monetary-policy outlooks leave sterling sensitive to both US inflation and employment data and UK economic indicators.
What’s Being Said
Reuters reported that sterling has benefited from a softer dollar, while markets are increasingly pricing additional Bank of England rate increases as geopolitical developments keep energy prices elevated.
At the Federal Reserve, Warsh has maintained that persistent inflation could require additional policy tightening, increasing the importance of incoming US data before the September meeting.
What’s Next
- Federal Reserve policymakers will meet on September 15–16, with markets focused on whether the central bank raises interest rates
- Bank of England Governor Andrew Bailey is scheduled to speak on September 4, while the next UK monetary-policy decision and minutes are due September 17
Bottom Line:
Sterling’s hold around $1.35 reflects a balance between dollar weakness and rising expectations for tighter monetary policy on both sides of the Atlantic. The next US and UK policy signals will determine whether the pound can break higher or retreats from the $1.35 level.
