Pound to Dollar Forecast: "Break Above 1.3490" to Conclude Weakness

July 22, 2025 - Written by Ben Hughes

STORY LINK Pound to Dollar Forecast: "Break Above 1.3490" to Conclude Weakness

The Pound to Dollar exchange rate (GBP/USD) again found support close to 1.3400 on Monday and rallied to highs around 1.3480 just after the US open.

Markets are calm, but unease over Fed policy and concerns over a “black swan” risk surrounding dollar liquidity could trigger a rapid increase in volatility.

UoB commented, “If GBP breaks above 1.3490, it would indicate that the GBP weakness from early this month has stabilised.”

Scotiabank maintains a slightly more positive outlook; “We note the importance of recent support at 1.34 and see the near-term balance of risk favoring upside. The near-term range is expected to be bound between support at 1.3400 and resistance above 1.3550.”

The dollar index is trading just above the 98.0 level.

Standard Chartered commented, “We expect the short squeeze risk in DXY to persist near term. However, for the DXY to break above its 100-day MA at 100, we would need to see consistently strong economic data, such as an upside surprise in the upcoming PMI.”

Dollar gains would put GBP/USD back under pressure, but looking at a slightly longer-term view, Standard Chartered considers that a further period of range trading is likely. “While GBP/USD may still correct lower in light of the stronger USD, resilient UK inflation could limit the downside and complicate the bearish narrative. This supports a range-bound GBP/USD between 1.32 to 1.36.”


US developments are liable to dominate over the next few days, although Bank of England Governor Bailey’s testimony to the Treasury on Tuesday will be watched closely.

In particular, markets will be watching any rhetoric surrounding the dollar swap market given that Bailey recently raised this as a potentially important issue.

Markets will want to know what contingency plans are in place if the US Treasury puts pressure on the Fed to limit global access to dollars.

There have also been reports that the BoE has asked lenders to test their resilience in the event of dollar shocks.

UK economic data late in the week will also be important for Pound sentiment.

Scotiabank commented, “Yield spreads are steady and holding on to last week’s gains, offering the pound support as market participants look to Thursday’s PMIs and Friday’s retail sales.”

Federal Reserve policy will inevitably remain a key element with markets looking at interest rate policy and threats to independence.


There are firm expectations that the Fed will leave interest rates unchanged at 4.50% next week, but White House pressure is likely to intensify ahead of the decision.

According to Scotiabank, “White House lobbying for lower interest rates may intensify, focusing markets on curve steepening and dollar-bearish trades.”

At this stage, expectations of a September rate cut have also dipped below 40%

Standard Chartered added, “While goods inflation is likely to continue rising in H2, we expect a slowing economy and job market to cool service-sector inflation, keeping overall price pressures in check. This scenario preserves the prospects of a September Fed rate cut.”

The dollar will be vulnerable if there is re-pricing of interest rate expectations.

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TAGS: Pound Dollar Forecasts