GBP/USD Forecast: Pound Rebounds Against Dollar as BoE Strikes Cautious Tone

May 8, 2025 - Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Rebounds Against Dollar as BoE Strikes Cautious Tone

The Pound-to-Dollar exchange rate wavered on Thursday but ultimately found a foothold, bolstered by a slightly more hawkish tone from the Bank of England (BoE) and renewed optimism over UK-US trade ties.

At the time of writing, GBP/USD was trading around $1.3329, having rebounded from earlier lows following a turbulent twenty-four hours.

The Pound (GBP) initially struggled on Thursday ahead of the BoE’s widely expected interest rate cut, but quickly rallied as markets digested the tone of the central bank’s messaging.

While the Monetary Policy Committee (MPC) voted to reduce the Bank Rate by 25 basis points, the decision was not unanimous, with two members voting to keep rates unchanged.

This dissent, alongside only a modest revision to the BoE’s inflation outlook, hinted at a more cautious approach to future cuts than investors had anticipated. As a result, Sterling clawed back earlier losses and even advanced against some major peers.

Adding to the Pound’s resilience was the recent optimism around UK-US trade relations. After hinting at a deal overnight on Wednesday, President Donald Trump then confirmed that a ‘full and comprehensive’ deal between the UK and US would be the first agreement announced since he introduced his ‘liberation day’ tariffs.

Coming on the heels of a UK-India agreement and amid broader signs of rebuilding post-Brexit relations with the EU, markets welcomed the news as a potential positive for the UK economy.


Meanwhile, the US Dollar (USD) managed to avoid significant losses, helped by residual strength from Wednesday’s Federal Reserve decision. The Fed opted to keep interest rates steady, as expected, but struck a tone that suggested policymakers were in no hurry to ease monetary policy.

Fed Chair Jerome Powell reinforced this view during the post-decision press conference, indicating that the bank would prefer to wait and see how tariffs impact the US economy before acting again. He also flagged inflation risks as a key concern, which prompted investors to dial back expectations of a near-term rate cut.

This shift in outlook gave the US Dollar a lift midweek and helped it avoid steeper losses on Thursday, even as the Pound regained some traction.

Looking ahead, GBP/USD could remain sensitive to commentary from key central bank figures due to speak on Friday.

BoE Governor Andrew Bailey is due to speak in the morning, and any indication that the British central bank might speed up rate cuts if inflation cools more quickly could weigh on the Pound.

Later in the day, a string of speeches from Fed officials will be closely watched. If the messaging echoes Powell’s stance – favouring a cautious and data-driven approach – the US Dollar could remain supported. Conversely, if recession risks or concerns over the labour market come to the fore, the ‘Greenback’ may weaken.

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TAGS: Pound Dollar Forecasts