Pound to Dollar Forecast: Consolidation for Now, Longer-Term 1.43

May 5, 2025 - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: Consolidation for Now, Longer-Term 1.43

Bank of America forecasts that the Pound to Dollar exchange rate (GBP/USD) will strengthen to 1.43 at the end of 2025 with a further advance to 1.54 at the end of next year.

HSBC has lowered its dollar outlook with the end-2025 dollar forecast at 1.32 from 1.23 previously.

GBP/USD hit 3-year highs just below 1.3450 during the week before a retreat to just below 1.3300.

Interest rate decisions will be a key element in the week ahead.

There are strong expectations that the Bank of England will cut interest rates by 25 basis points to 4.25% with expectations that a minority of MPC members will vote for a larger cut. Guidance from the bank will be crucial for the Pound.

Rabobank noted the possibility of dovish guidance, but added; “Given the potential for a hot April CPI print, the MPC may prefer to keep its options open and stick to its current guidance of careful and careful cuts. We therefore hesitate to call for a follow-up cut in June, but a cold CPI print could change that.”

According to ING; “The Bank of England is poised to cut rates at its 8 May meeting, and markets are pricing a faster pace of easing thereafter. We're less convinced the Bank will deviate from its once-per-quarter cutting rhythm, but we do think it could cut rates to a lower level than investors are currently expecting.”


Rabobank is wary over overall UK fundamentals; “The UK’s current account deficit can leave GBP exposed when UK fundamentals are weak. Currently, soft growth and a high level of indebtedness in the UK will not endear the pound to investors.”

The bank also has a 12-month GBP/USD forecast of 1.32.

The Federal Reserve is not expected to cut interest rates on Wednesday with the Fed Funds rate held at 4.50%.

Markets see no real chance of a cut at this meeting while there is a 60% chance of a June move.

There will be no updated forecasts at this meeting.

Guidance from Chair Powell will be crucial for the dollar, especially given the strong political pressure from the US Administration.

The US labour-market data was slightly stronger than expected with an increase in non-farm payrolls of 177,000 for April and unemployment held at 4.2%.


GDP, however, contracted at an annualised rate of 0.3% for the first quarter while consumer confidence dipped further to 5-year lows with the expectations element at a 14-year low.

The extent of dollar confidence will be a crucial element with a focus on trade, Fed independence and capital flows.

HSBC commented; “There are questions about its structural properties that we have not had to take more seriously for some time. We do not believe there is enough evidence to fully embrace those concerns but we cannot discount them either. Putting these together tells us that the DXY will be in a softer position over the coming quarters.

It added; “We could see some reweighting back towards our previous USD framework that laid the grounds for a healthier USD. For now though, we are sailing away from the currency.”

SocGen notes the importance of data; “The lag between policy announcements and their impact on the US economy is however significant and the fall in the dollar (and US equity indices) is now pausing/correcting. It will resume when/if economic data confirm market fears that the US is in for a period of slower growth and higher inflation.”

Standard Chartered commented; Our baseline expectation is that the USD will be slightly weaker versus current spot but basically stable through year-end. The US administration seems to be making its most determined effort in months to reassure markets on tariffs and other policies. But even after the administration’s positive announcements on tariff progress and equity market gains, the USD has not traded very firmly.”

It added; “This makes us think that the adjustment of USD positions is continuing and could take the USD a bit lower.”

The bank has increased its end-2025 GBP/USD forecast to 1.35 from 1.26.

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TAGS: Currency Predictions Pound Dollar Forecasts