Pound to Dollar Forecast: GBP and USD to Struggle in Months Ahead

Modified: Monday, 28 July 2025 09:00 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: GBP and USD to Struggle in Months Ahead

Danske Bank expects that the Pound and Dollar will both struggle over the next few months with the Pound to Dollar (GBP/USD) exchange rate advancing to 1.38 on a 12-month view.

Wells Fargo expects a dollar recovery next year and forecasts GBP/USD will weaken to 1.30 by the end of next year.

GBP/USD rallied to near 1.3600 during the week before a retreat to below 1.3450.

Trials and tribulations of central banks is likely to remain a dominant theme in the near term.

The latest UK PMI data recorded a slowdown in services-sector growth while manufacturing remained in contraction territory. There was, however, evidence of stronger upward pressure on costs and prices.

There are likely to be increased concerns that the UK economy is facing stagflation conditions.

Chris Williamson, Chief Business Economist, S&P Global Market Intelligence commented; The July PMI survey has offerings for both the hawks and doves at the Bank of England. Sluggish output amid falling demand and the further marked fall in employment suggest there's a need for the economy to be injected with more stimulus in the form of lower interest rates.”


He added; “On the other hand, hawkish policymakers may want to see more evidence that the recent rise in price pressures, widely linked by companies to the Budget measures implemented in April, is transitory before feeling comfortable in cutting rates further.”

Elsewhere, retail sales recorded a tepid recovery for June while consumer confidence edged lower as consumer looked to increase savings.

There was also the second-highest June government borrowing requirement on record, increasing unease over the medium-term fiscal outlook.

According to Danske; “Payrolls have dropped consistently, and unfilled vacancies continue to edge lower. On the flip side, wage growth remains elevated, and inflation surprised to the topside in June, which leaves a tricky backdrop for the Bank of England (BoE).”

Bank of America detects a loss of confidence in the Pound; “We have been constructive toward GBP for much of this year, with fleeting success, but have sensed a sea-change in sentiment over the past month. Whilst it would be easy to point the finger at recent events surrounding the Chancellor, the reality is that GBP had been struggling before that event.”

The bank, however, considers that market fears may be overdone; “We do not understate the fragile state of UK public finances but continue to be struck by how markets are willing to find the UK guilty of fiscal breaches before being the opportunity of proving innocence.”

It added; “We feel the conditions are now in place for a bounce in GBP through the summer months.”


The dollar came under sharp pressure during the week before staging a late recovery.

Markets are very confident that the Federal Reserve will leave rates at 4.50% at this week’s meeting, but there are still important concerns that the Fed will be politicised with President Trump and the Administration continuing to push for sharply lower interest rates.

According to Macquarie; “Whether it is done via new legislation, influential appointments, or new threats that intimidate the Fed and test its fortitude, the US administration is hell-bent on controlling the monetary policies of the Fed by 2026.”

Wells Fargo expects a dollar rebound next year; “With the status of the U.S. dollar as the world's reserve currency still relatively secure, the stronger performance of the U.S. economy in 2026 should also allow for a stronger dollar next year.”

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TAGS: Pound Dollar Forecasts