Pound-to-Dollar Week Ahead Forecast: 1.34 Today, 1.32 Next Target?

June 23, 2025 - Written by Ben Hughes

STORY LINK Pound-to-Dollar Week Ahead Forecast: 1.34 Today, 1.32 Next Target?

GBP/USD Exchange Rate Outlook Clouded by Iran Conflict, Diverging Forecasts from Goldman Sachs and ING, and Shifting Dollar Safe-Haven Status

Market reaction to the US military strikes on Iran will be a significant indicator of overall dollar confidence and the extent to which it is still a global safe haven.

Goldman Sachs remains bearish on the dollar and projects GBP/USD gains to 1.44 on a 12-month view.

ING expects GBP/USD will be held in tight ranges and retreat to 1.32 on a 12-month view amid weaker UK fundamentals and some dollar resilience.

The Pound to Dollar (GBP/USD) exchange rate was unable to hold above 1.3600 early in the week and retreated to below 1.3500.

The Pound was hurt by unease surrounding the Middle East situation and GBP/USD will be marked lower on Monday following the US miliary strike against three key nuclear sites including Fordo.

Indicative prices suggest a figure around 1.3420, but there will be very choppy trading.


GBP/USD will tend to weaken further if the Iran/Israel conflict intensifies, especially if there is a spike in energy prices.

Any concessions by Iran would tend to support GBP/USD.

The Bank of England held interest rates at 4.25% at the latest policy meeting which was in line with strong consensus forecasts.

There was a 6-3 vote for the decision with Dhingra, Taylor and Ramsden backing a further cut to 4.00%.

There was no major shift in guidance with markets still confident that there would be a further cut at the August policy meeting.

The Middle East situation, however, as well as unresolved trade issues will maintain a high degree of uncertainty.

Danske Bank commented; “We expect the BoE to stick to quarterly cuts, leaving the Bank Rate at 3.75% by YE 2025, which is aligned with market pricing. However, we highlight that the risk is skewed towards a swifter cutting cycle in 2025 and 2026 given the downside risks to growth and the labour market.”


ING expects weaker fundamentals; “After absorbing the positives of the US and EU trade deals and a hawkish BoE tilt, a seasonally soft period for UK growth in 2H, signs of deterioration in the jobs market and seemingly inevitable tax hikes in autumn, means GBP’s attractiveness can falter in the remainder of 2025.”

The Federal Reserve held interest rates at 4.50%, also in line with strong market expectations.

Chair Powell reiterated that the central bank could be patient in waiting to assess economic conditions before taking any decisions on interest rates.

The committee members overall continued to forecast two rate cuts for this year, but there was a notable split in opinion.

RBC Capital Markets expects sustained cuts from the third quarter; “Our forecast remains unchanged for a first cut at the September meeting, with 25bp cuts at each subsequent meeting until May 2026 (i.e. terminal rate at 2.75%-3.00%). The risks around that call are skewed towards later.”

ANZ remains concerned over underlying US fundamentals; “Investors now also pay a premium to buy US government bonds, similar to the UK’s experience of the last three years. Tariff revenue was never likely to fill the US’s fiscal shortfalls, and that has now been confirmed. The US’s budget and current account deficits are both larger than the UK’s.”

The bank added; “Shakespeare’s most famous play is about the tragedy of political hubris. The three bond markets sending messages about the limits of fiscal ambition – the UK, US and Japan – are also joined by divided bodies politic. The dollar is still the reserve currency, but – and with apologies to the Bard – trouble is brewing.”

Goldman Sachs expects businesses and consumers will bear the brunt of tariff increases and noted; “As a result, tariffs will cut into US firms’ profits and US households’ real incomes, which have been the driving force behind ‘US exceptionalism’ and the strong Dollar.”

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TAGS: Pound Dollar Forecasts