GBP/USD Forecast: Dollar on the Ropes, Pound to Challenge 39-Month Best

June 2, 2025 - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Dollar on the Ropes, Pound to Challenge 39-Month Best

Unease over tariffs, the US economic outlook and underlying unease over fiscal policy sapped dollar support on Monday.

US equity future also lost ground which hampered the US currency.

After dipping to 1.3450 on Friday, the Pound to Dollar (GBP/USD) exchange rate surged to around 1.3550 on Monday and near 39-month highs just below 1.3600 posted last week.

According to UoB; “the current price movements still appear to be part of a range trading phase, albeit a higher one, between 1.3400 and 1.3600.”

Any break above 1.3600 would be likely to trigger another round of buying.

Late on Friday, President Trump announced that the tariffs on steel and aluminium imports into the US would be increased to 50% from 25% on June 4th.

In an immediate reaction, the EU Commission threatened to retaliate and added; "This decision adds further uncertainty to the global economy and increases costs for consumers and businesses on both sides of the Atlantic."


The legal row over Trump’s reciprocal tariffs is also a key element after an appeals court overturned an immediate ban and stated that tariffs could remain in effect until the legal process is completed.

There are expectations that the process will end up in the Supreme Court.

Danske Bank commented; “legal challenges have introduced considerable uncertainty into ongoing trade negotiations, with US trading partners now reassessing the most likely outcomes.”

According to ING; “Either the Supreme Court overturns the existing ruling, in which case, nothing changes. Or, if that fails, then surely the US Administration simply rebuilds these tariffs through other means, which there are plenty of.”

It added; “In the meantime, that may well embolden Trump to crack on with other sectoral tariffs on the likes of chips and pharma, which are not subject to this court action.”

Over the weekend, the US and China also exchanged barbs over compliance with existing trade agreements.

ING commented; “It's not quite fair to say that the US-China trade deal reached in Geneva last month is unravelling, but both sides clearly seem frustrated.”


It added; “Any early end to the deal, which lasts until 12 August, would hit risk assets and the dollar again. All the while, talks with both the EU and China are not exactly going well.

The clock is also ticking on the July 9th deadline when the 90-day tariff pause is due to expire.

According to Nordea; “The US administration is reportedly already planning alternatives under different US laws to impose tariffs, and we do not think the threat of major tariffs has receded in any way.”

MUFG commented; “The risk is that prolonged policy uncertainty in the US will hurt the US economy more leading to a weaker US dollar.”

Fiscal policy also remains an important background focus.

According to Nordea; “We do note that fiscal worries have been a recurring market theme in the US in the past years, but usually only for a relatively short period of time.”

It added; “Only time will tell, whether this time will be different. However, at least it is easy to argue that since the current uncertainties go well beyond fiscal worries and rising public debt and include doubts towards USD investments more broadly, this time the risks in favour of clearly higher risk premia.”

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TAGS: Pound Dollar Forecasts