Pound-to-Dollar Forecast: "GBP Strength was Short-lived"

July 27, 2025 - Written by David Woodsmith

STORY LINK Pound-to-Dollar Forecast: "GBP Strength was Short-lived"

Stagflation Fears Continue to Undermine Pound Support, GBP/USD Risks Key Downside Break

The Pound to Dollar exchange rate (GBP/USD) dipped towards 1.3500 on Thursday and retreated below this level in early Europe on Friday with further selling.

The dollar has secured net gains in global markets while the UK data has not provided Pound support.

Overall risk appetite has also stumbled on Friday which has also unsettled the Pound and GBP/USD has posted sharp losses to lows at 1.3425.

According to UoB; “upward momentum has largely faded. To look at it another way, the GBP strength was short-lived.”

It considers that the break below 1.3450 would increase the risk of further selling.

Key support for the Pound is close to 1.3370 and any break below this level would cause further important damage to the outlook.


Bank of America commented; “To say that GBP has had an inauspicious start to H2 is an understatement.”

UK retail sales volumes increased 0.9% for June after a revised 2.8% slide for May, but slightly below consensus forecasts of a 1.2% gain for the month.

There was a rebound in food sales after a sharp decline previously.

According to the ONS; “The warm weather in June helped to brighten sales, with supermarket retailers reporting stronger trading and an increase in drink purchases. It was also a good month for fuel sales as consumers ventured out and about in the sunshine.”

RSM head of retail Jacqui Baker noted that there was still an important element of caution; “While the June figures are welcome news and consumer confidence ticked up last month, nervousness among consumers persists, and the unexpected rise in inflation won’t have helped. The higher price of essentials such as food and fuel will only add to the reluctance among consumers to spend as their discretionary income shrinks.”

The latest GfK consumer confidence index reported a slight decline to -19 for July from -18 the previous month.

There was significant evidence of caution with consumers ramping up savings to the highest level since 2007.


Neil Bellamy, consumer insights director at GfK, commented; "With speculation growing over possible tax rises in the Autumn budget, and price pressure contributing not just to higher inflation already but also to the likelihood of worse inflation to come, the news is worrying.”

According to MUFG; “The PMI data was for July and underlines the likelihood that the UK economy has got off to a weak start in Q3.”

It added; “This grim news was clearly more impactful than the positive news of a trade deal being confirmed between the UK and India.”

ING noted that survey evidence has indicated economic vulnerability and a weaker labour market at the same time as on-going upward pressure on prices.

It commented that; “The latest UK Purchasing Managers' Index (PMI) perfectly encapsulate the headache the Bank of England faces right now.”

The bank added; “Which of these trends – higher inflation or lower hiring – matters more? This is not a new debate and one that's far from resolved, setting up another divisive August Bank of England meeting. We wouldn't be at all surprised to see another three-way vote split, akin to what we saw in May.”

According to the IMF; “In an environment of weak growth, persistent inflationary pressures may create “stagflation” risks, complicating the monetary policy stance and putting pressure on public finances.

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: Currency Predictions Pound Dollar Forecasts