Dollar strength persists as bond yields lift GBP/USD

The British pound steadied against the US dollar on September 25, 2026, with gains limited by a broader US Treasury bond sell-off and elevated energy market expectations. GBP/USD rose by 0.09% to 1.3233, while the euro remained under pressure, falling 0.12% to 1.1392 against the dollar. The dollar’s strength was underpinned by a 20-basis-point rise in the 2-year SOFR rate over the prior 48 hours and market pricing for further Federal Reserve rate hikes, including a 18-basis-point chance of a hike in October. By January 2027, markets anticipated two full hikes, and nearly four by mid-2027, reflecting persistent inflation concerns and a hawkish monetary policy outlook. Meanwhile, French 10-year bond yields traded 110 basis points above German bunds, widening the eurozone’s funding spread amid political uncertainty over France’s budget proposal, despite reports suggesting Marine Le Pen might support it. Sterling’s modest advance was driven by global risk appetite and energy dynamics rather than UK-specific factors, with oil prices remaining elevated after the UN General Assembly summit failed to resolve tensions in the Strait of Hormuz. While US-Iran talks briefly sparked corrections, markets quickly recovered, citing skepticism over sustained progress. Economic resilience, evidenced by strong Ifo index and PMI data, partially offset EUR/USD gains but did not reverse the broader eurozone funding pressures. Analysts at ING cautioned against concluding the end of the USD rally, warning that downside risks persisted and a break below 1.1320–1.1330 support levels could further weaken EUR/USD.