Pound to Dollar Week Ahead Forecast: 1.36 Next

June 1, 2025 - Written by Tim Boyer

STORY LINK Pound to Dollar Week Ahead Forecast: 1.36 Next

Morgan Stanley forecasts that the Pound to Dollar exchange rate (GBP/USD) will strengthen to 1.45 by the second quarter of 2026 and, in a bullish scenario, these gains could extend to 1.51.

Credit Agricole, Nomura and Wells Fargo expects that GBP/USD will be held below 1.40 due to a dollar revival or underlying Pound vulnerability.

GBP/USD hit 39-month highs just below 1.3600 early in the week before a retreat to near 1.3450 with no major UK developments during the week.

There are still major uncertainties over US trade policy with tariffs still dominating the headlines. A trade court ruled that the US Administration’s use of emergency legislation to impose reciprocal tariffs was unconstitutional, but an appeals court has allowed the tariffs to remain in place while the legal process continues.

The issue is likely to reach the Supreme Court, further complicating any timeline.

Nomura commented; “this ruling is unlikely to prevent the Trump administration from eventually implementing tariffs, and in the meantime, this will add to the uncertainty around the current state of trade policy and ongoing negotiations.”

Morgan Stanley is bearish on the dollar; “We expect the DXY (dollar index) to fall 9% to 91 by mid-2026, thanks to both a convergence in US rates and growth to peers and a further rise in risk premium due to increasing FX-hedging flows and investor focus on USD's safe-haven status.”


Wells Fargo remains bullish on the dollar in 2026; “The combination of a rebound in U.S. economic activity and an end to Fed easing should be sufficient for the trade-weighted U.S. dollar to trend higher and foreign currencies to softer. Overall, we remain positive on balance on the prospects for the U.S. currency over the longer term.”

US initial jobless claims increased to 240,000 in the latest week from 226,000 previously while continuing claims hit the highest level since November 2021.

MUFG commented; “The move higher can only be described as a slow grind but nonetheless, 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.”

Markets expect the Fed to remain on hold in the short term and the Fed minutes from May’s meeting were relatively hawkish

According to JP Morgan “Despite the added uncertainty, the tone of these minutes was quite similar to the prior set, given that for the time being the tenor of the incoming flow of economic data has changed little, especially with regard to employment.”

The labour-market data will continue to be watched very closely with the monthly employment report on June 6th. The dollar will be under significant pressure if the data is much weaker than expected.

MUFG commented; “Come 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.”


Nomura remains cautious on the Pound outlook; “The stagflationary issues that have started to plague USD have been prevalent in the UK for some time , fiscal concerns are more likely to become a hindrance for the currency, external balances are broadly negative, and GBP is already showing signs of overvaluation.

According to Credit Agricole; “It would take further improvement of global risk appetite to help the high-yielding GBP outperform again.”

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TAGS: Currency Predictions Pound Dollar Forecasts