Pound to US Dollar Forecast: GBP must hold above 1.3595

June 27, 2025 - Written by James Fuller

STORY LINK Pound to US Dollar Forecast: GBP must hold above 1.3595

The easing of immediate Middle East fears has put the focus firmly back on underlying fundamentals with the dollar sliding amid fresh fears that Fed independence will be compromised.

Following the latest salvo against Fed Chair Powell from President Trump, there has been increased speculation that there will be an early nomination of the next chair and fresh talk that Powell could be dismissed by Trump.

The dollar index has slumped to the lowest level since February 2022 while the Pound to Dollar (GBP/USD) exchange rate has surged to 44-month highs above 1.3750.

MUFG commented; “Broad-based US dollar weakness helped to lift EUR/USD and cable overnight as they continue to move back closer towards the highs set back in late 2020/early 2021 when they peaked at just above 1.2000 and 1.4000.”

Markets will be looking to attack 1.40 in GBP/USD, although there is tough resistance close to current levels and the dollar is potentially oversold.

ING commented; “Downside risks for the dollar persist, but another 1-2% plunge in DXY will look stretched without any dovish repricing in Fed expectations or tariff/deficit concerns resurfacing.”

UoB noted resistance near 1.3750 and added; “To sustain the buildup in momentum, GBP must hold above the ‘strong support’ level, currently at 1.3595.”


Fed Chair Powell maintained a cautious stance in his second round of testimony to Congress. The rejection of a near-term rate cut has triggered another blast of criticism from President Trump who has again threatened to fire Powell and name a successor quickly.

MUFG noted a Wall Street Journal report that a successor to Powell could be named by September at the latest and potentially next month.

The bank added; “It highlights how an early pick could be used as way to try to undermine the Fed’s policymaking under Chair Powell providing a further potential trigger for a loss of investor confidence in the US dollar.”

There have been reports that Trump is considering former Fed governor Kevin Warsh, National Economic Council director Kevin Hassett and Treasury Secretary Scott Bessent as potential candidates.

According to MUFG; “Other contenders include former World Bank President David Malpass and Fed governor Christopher Waller.”

The bank summarised; “A candidate who is perceived as being more open to lowering rates in line with President Trump’s demands would reinforce the US dollar’s current weakening trend.”

IG market analyst Tony Sycamore commented; “I think it’s a given that Trump's pick to succeed Powell, when it comes, will be one that sits at the highly dovish end of the spectrum and will support Trump's agenda of lowering interest rates."


He added; "The issue with this is it will resurface questions from earlier in the year around the Fed's independence, which, as we saw, undermines confidence in the Fed and the USD."

There has been a shift in market pricing with a rate cut by September now seen as inevitable with markets also seeing the most likely outcome as three rate cuts by the end of 2025.

In contrast, markets are pricing in two Bank of England rate cuts by the end of 2025 which would help underpin the Pound on yield grounds.

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TAGS: Pound Dollar Forecasts