Pound to Dollar Forecast 2025: 1.40 by 2026, Then Rebound

July 15, 2025 - Written by Frank Davies

STORY LINK Pound to Dollar Forecast 2025: 1.40 by 2026, Then Rebound

The Pound to Dollar exchange rate (GBP/USD) dipped to 3-week lows, fractionally above 1.3450, on Monday before a tentative recovery to 1.3485.

The Pound has been undermined by increased chatter of a more aggressive Bank of England agenda to cut interest rates. The dollar has held firm, but there is still a high degree of uncertainty over Federal Reserve policy amid major economic and political dimensions.

According to UoB; “Looking ahead, if GBP were to break and hold below 1.3445, it may trigger a deeper decline towards June’s low, near 1.3375.”

Scotiabank commented that GBP/USD will need to regain the 1.3500 area quickly to alleviate the pressure for further losses.

Credit Agricole has a year-end GBP/USD forecast of 1.40 with scope for a Pound rebound.

In comments over the weekend, Bank of England Governor Bailey stated that he is convinced that interest rates will continue to decline. He also stated that the gradual and cautious policy towards rate cuts is still justified.

He did, however, add on the labour market; “If we saw the slack opening up much more quickly, that would lead us to a different conclusion.”


In this context, UK data will be watched closely this week with the inflation data on Wednesday and labour-market release on Thursday.

Interactive Investor head of investment Victoria Scholar commented; “Friday’s disappointing GDP figures, combined with these weak jobs figures boost the case for the Bank of England to cut interest rates in August.”

She added; “All eyes are on Wednesday’s inflation report with CPI expected to remain at remain around 3.4% in June, roughly unchanged for the third consecutive month.”

The core rate is forecast to hold at 3.5% for the month.

Marekts are now pricing to over an 85% chance of an August cut with a further cut before year-end.

Weak labour-market data and high inflation would be potentially toxic for the Pound with increased stagflation fears.

The US will release the latest consumer prices inflation data on Tuesday. Consensus forecasts are for the headline inflation rate to increase to 2.6% from 2.4%.


Markets will also focus strongly on the core data.

ING commented; “This is expected to start ticking back up to 0.3% month-on-month increases as the effects of tariffs finally start to show up, although the effects might be more sizeable in the July-September data than the June data.”

It added that expectations of a September cut could dip further and; “prove slightly positive for the dollar.”

Weaker than expected data would trigger fresh speculation over near-term interest rate cuts and increase US Administration demands for the Fed to act aggressively.

Over the weekend, there was further speculation that President Trump would look to dismiss Fed Chair Powell.

There were comments from National Economic Council Director Kevin Hassett that Trump does have the authority to fire Powell if there is cause.

In this context, there has been further chatter that allegations of excess spending on the Fed renovation programme would be used to justify the move.

Former Fed Governor Warsh also criticised the Fed; “It’s lost, lost its way in supervision, it’s lost its way in monetary policy, and all this big money on big, fancy buildings is just another indication.”

Importantly, these two have been cited as being on the short list to replace Powell.

Rabobank commented; “Is the Trump administration creating another bit of pre-text for firing Powell?”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts