GBP/USD Forecast: Pound Testing Best Buy vs Dollar of 3 Years

May 6, 2025 - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Pound Testing Best Buy vs Dollar of 3 Years

The Pound to Dollar exchange rate (GBP/USD) found support at 1.3260 and rallied to 1.3330 as the dollar stumbled again.

The US dollar has remained vulnerable in global markets with further speculation that losses against Asian currencies will be a catalyst for wider losses.

ING considers medium-term worries are justified, but sees scope for the dollar to stabilise in the near term; “The new USD downside risks stemming from Asia shouldn’t be downplayed, but might not all play out in the near term.”

GBP/USD, however, has not been able to break above the 1.3350 level and will need to do so to mount a challenge on 3-year highs.

According to UoB; “While the pullback from the late Apr high of 1.3445 has not gathered much momentum, there is room for GBP to continue to pull back. However, it remains to be seen if GBP can reach the major support at 1.3160. On the upside, a breach of 1.3360 would indicate that GBP is not pulling back further.”

The US economic data has, so far, indicated that the economy has been broadly resilient and not backed the argument that the dollar will weaken due to increased recession fears.

There have, however, been further concerns that the US currency remains vulnerable due to a reallocation of global asset allocations.


In this context, there has been further speculation that a dollar decline will be led by Asian currency gains.

As far as data is concerned, the US ISM services-sector business confidence index improved to 51.6 for April from 50.8 previously and above consensus forecasts of 50.2.

Business activity and orders were in positive territory while employment declined at a slower rate with increased inflation pressures.

Goldman Sachs commented; “data so far have generally reaffirmed that the US economy entered this period with solid momentum, as underlying measures of Q1 domestic demand help demonstrate, and the surprisingly resilient ISM report and company capex spending plans suggest that sentiment did not weaken materially over the course of April.”

Overall confidence in the dollar remains weak.

Commonwealth Bank of Australia currency strategist Carol Kong noted; "U.S. Treasury yields are basically back to where they were prior to 'Liberation Day', but the U.S. dollar is still sharply weaker. I think that just indicates that markets are still unsure of the U.S. dollar's safe-haven status, investors are wary of putting their money into the U.S. dollar."

The Taiwan dollar was subjected to another volatile session on Tuesday, but there was a net retreat on the day after huge gains over the previous two sessions.


ING did note the increased dollar risk profile; “local players are now seeking greater USD hedging as well as starting to diversify away from US investments. This fits into a more worrying bearish narrative for the dollar, and opens up a risk that a period of supposedly USD-positive trade deals with Asian countries may turn into an opportunity for USD-rich Asian countries to reduce USD exposure.

US rhetoric and policy action will be watched closely.

ING added; “We’ll be closely watching whether improved liquidity from today and indications from the CNY fixing suggest an acceleration, and whether the Treasury will be fine with any more broad-based USD declines before the inflationary hit from tariffs has been absorbed.”

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TAGS: Pound Dollar Forecasts