Pound to Dollar in "Flat Range" as USD Rates Marginally Softer

May 20, 2025 - Written by David Woodsmith

STORY LINK Pound to Dollar in "Flat Range" as USD Rates Marginally Softer

The Pound US Dollar exchange rate was rangebound on Tuesday despite Moody’s decision to downgrade the United States’ sovereign credit rating on Monday.

At the time of writing, GBP/USD was trading at approximately $1.3371, virtually unchanged from the start of Tuesday’s session.

The US Dollar (USD) extended its decline on Tuesday, sliding against nearly all of its major peers despite a quiet economic calendar.

The ‘Greenback’ came under sustained pressure as markets continued to react to Monday’s credit rating downgrade by Moody’s, one of the last major agencies to strip the US of its top-tier AAA status.

Moody’s cited widening fiscal deficits, persistent political deadlock and long-term debt sustainability risks as key reasons for lowering the US’s sovereign rating down to AA1.

The move dealt a blow to USD investor confidence, fuelling concerns over the country’s financial trajectory and dragging the Dollar lower throughout Tuesday’s session.

The Pound (GBP) firmed on Tuesday, buoyed by improving political and economic sentiment tied to fresh developments in UK–EU relations.


Investors welcomed news of a newly announced trade agreement between the UK and the EU, designed to ease longstanding post-Brexit trade frictions, particularly those affecting the food and agriculture sectors.

The deal, viewed as a constructive step toward closer economic cooperation, helped reinforce confidence in the UK’s trade outlook and lifted Sterling across most major currency pairings.

Adding to the Pound’s upward momentum were comments from Bank of England (BoE) Chief Economist Huw Pill.

Speaking on the current interest rate trajectory, Pill cautioned that the central bank may be moving too quickly in its aggressive policy easing.

His remarks introduced a note of caution around near-term interest rate cuts, and in turn lent additional support to GBP.

The GBP/USD exchange rate is set to be shaped by key UK inflation data in mid-week trade, as markets await fresh insight into the Bank of England’s next move.

April’s consumer price index (CPI) figures are widely expected to show an acceleration in both core and headline inflation.


Forecasts point to core CPI rising to 3.6%, while headline inflation could climb sharply to 3.3%, up from 2.6% in March.

A rise in UK inflation could dampen expectations of imminent interest rate cuts from the Bank of England, especially following the country’s forecast-beating GDP reading last week, and potentially fuel renewed demand for the Pound.

Across the Atlantic, a continued lack of US economic data may leave the US Dollar vulnerable to broader market sentiment and commentary from Federal Reserve officials.

Several policymakers are scheduled to speak throughout Wednesday, and any signs of a dovish shift in tone could reinforce the ‘Greenback’s’ recent weakness, providing further support to the GBP/USD exchange rate.

"GBPUSD short-term technicals: Neutral – GBPUSD’s price action continues to be defined by the flat range bound between the mid-May low in the mid-1.31s and the late April high in the mid-1.34s. Momentum is neutral and we look to near-term support around 1.3250." Scotiabank

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TAGS: Pound Dollar Forecasts