Pound-to-Dollar Forecast: "GBP Outlook Shifted from Negative to Neutral"

July 23, 2025 - Written by Frank Davies

STORY LINK Pound-to-Dollar Forecast: "GBP Outlook Shifted from Negative to Neutral"

The Pound to Dollar exchange rate (GBP/USD) was unable to regain 1.3500 on Tuesday and consolidated around 1.3480 after Monday’s significant recovery.

UoB commented; “The outlook for GBP has shifted from negative to neutral; GBP is likely to trade in a range between 1.3415 and 1.3535.”

According to Scotiabank; “we see a near-term range bound between 1.3450 support and 1.3520 resistance.”

The latest UK government borrowing data dented Pound sentiment, although the overall impact has been limited at this stage.

Longer-term, Credit Agricole has a year-end GBP/USD forecast of 1.37 from 1.40 previously.

The June UK budget deficit increased sharply to £20.7bn for June from £14.1bn the previous year, above consensus forecasts of £17.4bn and the second-highest June deficit on record.

One major contributory component was debt interest payments which more than doubled to £16.4bn from £8.0bn the previous year.


Monex commented on the headline data; "These overshot expectations yet again, a fact that should refocus minds on UK fiscal sustainability risks."

It added; "As we have noted previously, this is not a sterling positive dynamic, leaving risks to the pound tilted to the downside ahead of Thursday’s PMI release.”

Saxo UK investor strategist Neil Wilson expects Autumn tax hikes and is focussing on the bond market reaction.

The 10-year yield has retreated to near 4.61% from earlier highs around 4.65% with the 30-year yield around 5.44%

According to Wilson; “we’re not yet back to yesterday’s highs so nothing to get jumpy about. But I do worry that we could see bond vigilantes hit gilts this autumn.”

Overall financial conditions will be a key element for both the dollar and Pound.

Scotiabank detects some warnings from US equity-market conditions; “it is clear that NYSE market breadth remains pretty poor—fewer stocks are driving broader index gains—which is not a great sign of health and we are right on the cusp of that time of the year when US equities typically hit a bit of an air pocket.”


The relationship between equities and the dollar fluctuates and is complex.

According to Scotiabank; “FX correlations with risk have normalized after an extended period in the spring when the USD tended to weaken with softer USD-denominated assets. But volatility might still be a test for the USD.”

The FTSE 100 index is testing record high, underpinning the Pound for now, but any slide in global equities would pose a threat to the Pound.

US trade developments will continue to be watched closely ahead of the August 1st tariff deadline with a high degree of uncertainty whether the Administration will look to extend deadlines.

Macquarie Group global FX and rates strategist Thierry Wizman commented; "Nothing that happens on August 1 is necessarily permanent, so long as the U.S. administration remains willing to talk, as was indicated in Trump's letters from two weeks ago."

Jonas Goltermann, deputy chief markets economist at Capital Economics looked at the interest rate implications; "Our base case remains that solid U.S. data and a tariff- driven rebound in inflation will keep the FOMC on hold into 2026, and that the resulting shift in interest rate differentials will drive a continued rebound in the dollar in the next few months"

He added; "But that view is clearly at the mercy of the White House's whims."

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TAGS: Pound Dollar Forecasts