Pound to Dollar Forecast: GBP Rate Hits 1.35, a 3-Year Best

May 23, 2025 - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: GBP Rate Hits 1.35, a 3-Year Best

The British Pound Sterling secured a limited boost from the latest UK retail sales data while the dollar was back on the defensive in global markets.

In this environment, the Pound to Dollar (GBP/USD) exchange rate hit fresh 3-year highs just above 1.3480.

Position adjustment will be significant on Friday with market holidays in the US and UK on Monday.

According to UoB; “momentum indicators continue to point to GBP upside, and the next technical target is at 1.3500.”

A sustained break above 1.3450 would boost medium-term sentiment and potentially open the door to notable gains towards 1.40.

Bank of America has a September target of 1.38.

There was further speculation over a net shift in assets away from US markets while UK equities posted gains on Friday with the FTSE 100 index close to 11-week highs which also underpinned the Pound in global markets.


As far as data is concerned, retail sales volumes increased 1.2% for April for April compared with consensus forecasts of 0.3%, although the March increase was revised down to 0.1% from the 0.4% reported originally.

The year-on-year increase strengthened to 5.0% from 1.9% previously.

Overall sales increased to the highest level since July 2022.

There was a strong increase 3.9% increase in food sales for the month driven by favourable weather conditions while non-food sales declined 0.7% on the month.

The UK GfK consumer confidence index improved to -20 for May from -23 previously and above consensus forecasts of -22.

All five main components improved on the month with consumers more optimistic over personal finances.

Neil Bellamy, Consumer Insights Director at GfK commented; Have consumers taken comfort from the Bank of England’s May 8th quarter-point base-rate cut? And have they breathed a tiny sigh of relief since April when the sudden turbulence of the Trump Tariffs was prompting dire warnings of economic damage and a return to inflation? Those dangers – especially the issue of inflation – have not disappeared but the consumer mood in the UK does appear to have improved a little.”


The dollar has lost ground on Friday with the risk of a lose-lose situation for the currency.

Higher bond yields increase fears over long-term US debt sustainability while a recovery in Treasuries tend to undermine the currency on yield grounds.

Treasuries rebounded late on Thursday and Danske Bank commented; “short covering could be at play ahead of the extended weekend due to Memorial Day on Monday.

There are still very important underlying concerns over fiscal policy with the Administration Budget Bill receiving approval in the House.

According to Danske Bank; “Attention will likely be on the Senate, where several Republican members have demanded major changes to vote in favour of the tax bill.”

The process in the upper house could last weeks, prolonging uncertainty.

Bank of Singapore currency strategist Moh Siong Sim commented; "This week we have seen a shift in the focus from tariffs to fiscal risks. That has caused a lot of nervousness in the market."

He added; "The fiscal trajectory in the U.S. has gotten to a point where the market is questioning whether 'can this go on?'."

Chris Weston, head of research at Pepperstone added; "What has become quite stark this week is the reaction function in broad markets to the rise in U.S. long-end Treasury yields."

He added; "Add in the toxic mix of higher inflation expectations and the net effect has been a strong rise in 'term premium' and the would-be foreign buyers simply staying out of the market."

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TAGS: Pound Dollar Forecasts