July 22, 2025 - Written by David Woodsmith
STORY LINK GBP/USD Price Forecast: Pound Slips as Deficit Fears Wobble Sterling
The Pound US Dollar (GBP/USD) exchange rate initially slipped on Tuesday before bouncing back following the latest UK borrowing figures.
At the time of writing, GBP/USD was trading at $1.3493, having rebounded quickly from its initial dip.
The Pound (GBP) wobbled on Tuesday after UK public sector borrowing for June came in at £20.7bn – well above forecasts of £15.6bn and the highest since April 2021. Weaker tax revenues and elevated debt servicing costs drove the shortfall, fuelling concerns over potential tax hikes in the autumn.
Sterling initially slipped as investors digested the figures, but GBP/USD later rebounded after the Office for Budget Responsibility (OBR) offered reassurance. The OBR noted that borrowing for the April–June quarter is ‘exactly in line’ with its March forecast, at £57.8bn, with receipts and spending tracking expectations.
The fiscal outlook for the rest of the year also appears brighter, with the OBR anticipating lower borrowing in H2, driven by higher capital gains tax receipts, reduced debt interest, and normalised social benefit spending.
The US Dollar (USD) clawed back losses on Tuesday, stabilising after a shaky start to the week as traders turned their focus to an upcoming speech from Federal Reserve Chair Jerome Powell.
The ‘Greenback’ had come under pressure after former President Donald Trump renewed his attacks on Powell, urging the Fed to slash interest rates despite persistent inflationary concerns and the risk of tariff-fuelled price rises.
However, expectations that Powell will defend the Fed’s cautious stance and resist political pressure helped lift the Dollar. Investors anticipate that the Fed Chair will signal a steady-handed approach, reaffirming the central bank’s commitment to data-driven policy over short-term political demands.
With little on the economic calendar midweek, the Pound Dollar exchange rate may trade sideways in the short term. In the absence of fresh drivers, broader market sentiment and shifts in risk appetite are likely to steer movement.
The tempo picks up on Thursday, starting with the UK’s flash PMI figures. Analysts anticipate a strong showing from the services sector, with forecasts pointing to a rise to 53, its highest reading since August 2024. A solid print could give Sterling some upward momentum.
Across the Atlantic, the US S&P Global PMIs are also due. While not as closely watched as the ISM releases, a positive surprise could lend support to the Dollar. Meanwhile, weekly jobless claims will be closely monitored. Any uptick in filings may weigh on USD sentiment.
Like this piece? Please share with your friends and colleagues:
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