Pound to US Dollar Forecast: "Underlying Bearish Tone of the USD"

May 31, 2025 - Written by David Woodsmith

STORY LINK Pound to US Dollar Forecast: "Underlying Bearish Tone of the USD"

The US Dollar (currency:USD,$) surrendered gains over the past 24 hours amid the high degree of trade uncertainty and weaker-than-expected US data.

The Pound to Dollar exchange rate (GBP/USD) moved back above 1.3500 before settling around 1.3480 on Friday. There will be choppy month-end trading during the day, amplifying volatility.

According to Scotiabank; “Monday’s multi-month high offers near-term resistance just below 1.36 and overnight price action has confirmed the importance of near-term support around 1.3420.”

Scotiabank also noted dollar selling on rallies.

It added; “This reflects the underlying bearish tone of the USD based on investor concerns about US institutional credibility and weak fiscal policy settings as well as potential challenges to Fed independence.”

Markets are attempting to navigate their way through US tariffs and trade policy, but the latest court rulings have increased uncertainty further and compromised dollar confidence.

Late on Thursday, the US Court of Appeals for the Federal Circuit in Washington temporarily reinstated the Trump trade tariffs which had been blocked on Wednesday.


At this stage, there is no clear timeline for the judicial process on reciprocal tariffs and a raft of potential policy actions will be considered if the tariffs are eventually declared unconstitutional by the Supreme Court.

There is set to be an initial period of evidence presentation which could last until June 9th with the risk of a prolonged hiatus.

Rodrigo Catril, senior FX strategist at National Australia Bank commented; "Trump's trade agenda remains alive and kicking, with the legal battle adding yet another layer of uncertainty."

He added; "The only thing that looks more certain is more uncertainty, which will lead to additional delays in investment decisions and hiring.”

The US could look to raise tariffs temporarily on grounds on economic discrimination and levies on economic sectors can be imposed under existing trade legislation.

Capital Economics estimated that overall tariffs are currently around 15%.

There will be further concerns that uncertainty and the tariff burden will have a negative impact on the economy and the latest US labour-market data fed into this narrative. Initial jobless claims increased to 240,000 from 226,000 previously and above consensus forecasts of 229,000 while continuing claims jumped to 1.92mn from 1.89mn and the highest reading since 2021.


MUFG commented; “The move higher can only be described as a slow grind but nonetheless with initial claims still in a range, the move higher in continued claims points to more difficult labour market conditions that means it is taking longer for job seekers to find new employment.”

First-quarter GDP was revised to an annualised rate of -0.2% from -0.3%, but there was a significant downward revision to consumer spending.

The latest PCE prices data is due for release on Friday. Consensus forecasts are for the year-on-year rate to retreat to 2.5% from 2.6% which would be a 4-year low.

President Trump met Fed Chair Powell on Thursday and according to ING; “This [data] might increase pressure on the Federal Reserve to ease, at a time when the White House is piling the pressure on Chair Jay Powell to cut rates.”

MUFG added; “By September the Fed is likely to be considerably behind other G10 central banks in returning policy to a neutral setting. That implies the Fed will then have more work to do in easing its monetary stance which we think will be a factor that will weigh more on the dollar later this year.”

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TAGS: Pound Dollar Forecasts