GBP/USD Forecast: Pound Price Finds Support as UK Inflation Remains Elevated

June 19, 2025 - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Pound Price Finds Support as UK Inflation Remains Elevated

The Pound-to-US Dollar exchange rate edged higher on Wednesday, buoyed by sticky UK inflation and cautious market reaction to growing Middle East tensions.

At the time of writing, GBP/USD was trading at $1.3455, up 0.2% on the day.

The Pound (GBP) managed to recoup some ground on Wednesday, following a modest uptick prompted by the UK’s latest inflation report.

Data from the Office for National Statistics (ONS) showed headline inflation dipped slightly in May, easing from 3.5% to 3.4%, matching expectations. More notable, however, was the decline in core inflation, which excludes food and energy prices. That reading fell from 3.8% to 3.5%, coming in below the projected 3.6%.

While the figures confirmed that inflationary pressures are gradually subsiding, the overall rate remains significantly above the Bank of England’s (BoE) 2% goal. This lingering price pressure tempered market expectations of an imminent interest rate cut, lending the Pound a degree of support midweek.

The US Dollar (USD) lost momentum midweek, as investor nerves were rattled by rising speculation over possible US military action in the Middle East.

After gaining ground on Tuesday amid a flight to safety, the ‘Greenback’ faltered on Wednesday as markets digested reports that the US could become more directly involved in the Israel-Iran conflict. While heightened geopolitical tensions typically support safe-haven currencies, the prospect of US intervention appeared to dampen appetite for the Dollar.


Comments from President Donald Trump hinting at potential strikes on Iran, coupled with reports of additional US military assets being deployed to the region, contributed to growing unease. This shift in sentiment saw traders dial back their demand for the Dollar, pulling the currency lower on the day.

For GBP investors, all eyes are now on the Bank of England’s upcoming interest rate decision, with markets keen to gauge the central bank’s next move.

While policymakers are widely expected to hold rates steady this month, traders will be paying close attention to the tone of the accompanying statement and how the Monetary Policy Committee (MPC) votes. Any signals suggesting that a rate cut could arrive as soon as August – or a shift towards a more dovish stance – could put renewed pressure on the Pound.

That said, a surprise rate cut this month, though unlikely, could trigger a sharper drop in GBP exchange rates.

Beyond domestic policy, geopolitical tensions remain a wildcard for the GBP/USD pair. If the conflict between Israel and Iran worsens, demand for the safe-haven Dollar could rise at the expense of Sterling. However, should the US become directly involved, the implications for USD are far less predictable.

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TAGS: Pound Dollar Forecasts