Pound to Dollar Forecast: Trend Bullish, but "Near-term Pullback Possible"

July 8, 2025 - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: Trend Bullish, but "Near-term Pullback Possible"

The Pound Sterling is forecast to stay supported against the Dollar in the near term, though risks remain from UK fiscal tensions and upcoming US trade announcements.

GBP/USD short-term technicals remain bullish/neutral according to foreign exchange forecasters at Scotiabank.

"The multi-month trend remains bullish, but we are looking to the possibility of a near-term pullback from recent multi-year highs."

US trade developments are likely to dominate in the short term with US Administration announcements on tariffs ahead of the July 9th deadline.

ING commented; “FX markets are preparing for a noisy week on trade.”

Meanwhile, the Pound is still vulnerable on fiscal grounds. The Pound to Dollar (GBP/USD) exchange rate dipped to lows at 1.3575 before settling close to 1.3600.

UoB commented; “Overall, only a breach of the ‘strong resistance’ at 1.3750 (no change in level) would indicate that the likelihood of GBP breaking clearly below 1.3560 has faded.”


Scotiabank, however, maintains a positive underlying stance on the Pound; “We remain bullish GBP and see no reason to make changes to our longer-term forecast targeting 1.40 by year-end 2025.”

US trade developments are likely to dominate in the short term.

On Monday, President Trump is set to start releasing letters informing countries of their tariff rates while last-minute negotiations will continue.

There have, however, also ben indications that tariffs would not come into effect until August 1st which would leave time for further negotiations.

Convera senior corporate FX dealer James Kniveton commented; "Market volatility appears inevitable when the pause officially ends and new tariff levels are announced."

Nevertheless, he added; "the impact may prove more muted this time. Unlike previous announcements where tariff levels exceeded expectations, current proposals are largely anticipated. Moreover, markets appear to be pricing in continued deadline extensions."

According to ING; “Threats of a resumption of 50% tariff levels could briefly hit the benign risk environment, although with a market already positioned underweight the dollar, the dollar might not have too far to fall.”


MUFG noted the risk of complacency given Administration unpredictability; “The ‘Trump Always Chickens Out’ (TACO) theory is certainly part of why investors show limited concerns. Hence, there is a risk of surprise for the markets if over the coming days the tariffs prove more aggressive than expected.”

It added; “More aggressive action will likely see some milder degree of repeat of what happened in April after ‘Liberation Day’ while a more benign scenario should push US Treasury yields lower, fuel stronger speculation of Fed rate cuts that would result in moderate dollar selling.”

Overall confidence in the Pound remains fragile amid fiscal and monetary policy reservations.

Expectations of tax increases in the Autumn budget have intensified further with some reports that tax increases of £20bn would be needed in the Autumn budget to meet current fiscal rules.

UBS economist Dean Turner commented; “We learned last week that any attempt to curb spending is going to prove almost impossible for this government, even with such a large majority. This inevitably means taxes are going up. The sooner the government is honest with the public and gets the deed done, the better.”

Turner downplayed the risk of selling in the UK bond market; “For investors in the gilt market, the volatility is likely here to stay for the time being. But this does not mean gilts do not look attractive, especially relative to cash, as interest rates will be much lower by the time the government’s second anniversary comes around.”

Scotiabank still has confidence in the Pound; “We see Wednesday’s political turbulence as a short-lived event with no lasting impact, given PM Starmer’s expression of continued support for Chancellor Reeves as both the PM and Chancellor seek to reinforce their commitment to fiscal responsibility in the UK.”

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TAGS: Pound Dollar Forecasts