Pound to US Dollar Forecast: "Trend in GBPUSD Remains Bullish"

May 22, 2025 - Written by Tim Boyer

STORY LINK Pound to US Dollar Forecast: "Trend in GBPUSD Remains Bullish"

US Dollar exchange rates have remained under pressure in global markets with ongoing fears surrounding US fiscal policy, especially with the Big Beautiful Budget Bill approved in the House of Representatives.

The Pound to Dollar exchange rate (GBP/USD) dipped to just below 1.3400 before a recovery to 1.3420.

According to Scotiabank, “With investor focus on US fiscal policy intensifying amid US budget negotiations, the performance of US Treasury bonds will likely continue to influence the USD and risk appetite.”

The Pound has not been able to take full advantage of dollar weakness due to reservations surrounding the UK budget position with weaker risk appetite and a fresh increase in UK bond yields also hampering Sterling.

According to Scotiabank; “The trend in GBPUSD remains bullish, with consolidation just below Wednesday’s multi-year high. The RSI is just below 60, leaving ample room for further near-term gains.”

A sustained break above 1.3450 would lead to an initial target of 1.35, but is likely to be dependent on further dollar losses.

According to ING “the USD can find some support, but a sustained recovery looks unlikely.”


The dollar initially came under pressure in Wednesday’s New York session.

There was a weak 20-year bond auction which triggered fresh concerns over the outlook and there was a sharp decline in Treasuries with a jump in yields.

MUFG commented; “The auction has basically resulted in another day of triple selling of US assets which will only reinforce the doubts over confidence in US assets.”

Just ahead of Thursday’s New York open, the House of Representatives approved the Budget Bill and it will now head to the Senate.

The 10-year yield moved sharply higher to a 3-month high above 4.60% after the Bill was approved by a 215-214 vote with equity futures also sliding.

Unease is likely to be magnified by last-minute changes to Bill which puts further upward pressure on deficits and debt.

MUFG added; “Nearly all of the S&P’s drop yesterday (-1.6%) came in response to the auction and underlines the increasing sensitivity of investors risk appetite to bad news for US Treasuries and underlines the risks being taken by the Trump administration in relation to the ‘One Big Beautiful Bill Act’.


Domestically, the April borrowing requirement increased to £20.2bn for April from £19.2bn the previous year

RSM economist Thomas Pugh commented; “With the public finances in a pretty dire state going into what is likely to be a much tougher Q2 and second half of the year for the economy, some fiscal consolidation in October, probably in the form of higher taxes, looks likely.”

The UK 10-year yield has moved above the 4.80% level to 6-week highs and is not far below January highs which will increase fears over debt interest payments, the deficit and wider damage to the economy.

Citi commented; “GBP has outperformed on relatively more hawkish BoE market pricing and trade deals with the EU and US; however, we suspect any increase in term premium risk that spills into the Gilt market can quickly see GBP weakness, especially as fiscal issues remain unresolved in the UK keeping term premium elevated.”

The CBI industrial trends survey retreated to -30 for May from -26 previously while PMI data was mixed with on-going manufacturing weakness, but a limited recovery in services.

Commerzbank Head of FX and Commodity Research Ulrich Leuchtmann commented; “Cable did gain ground yesterday, but this was more a USD story than GBP-driven. The strong inflation figures did not help against the Euro or the G10 average. For me, this means that for the pound to continue to gain ground across the board in the coming days and weeks, something new will have to happen."

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TAGS: Pound Dollar Forecasts