Pound Sterling to Dollar Forecast: Risk of GBP Retreat to 1.3150

Modified: Friday, 1 August 2025 07:00 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Dollar Forecast: Risk of GBP Retreat to 1.3150

The Pound to Dollar exchange rate (GBP/USD) came under renewed pressure after the Federal Reserve held interest rates at 4.50% and Fed Chair Powell struck a notably hawkish tone.

With no sign of a September rate cut and dissent from two dovish members, the US Dollar surged while the Pound Sterling dipped to 11-week lows, weighed further by expectations of a Bank of England rate cut next week.

Although the Federal Reserve decision to hold interest rates at 4.50% was expected, a relatively hawkish stance from Fed Chair Powell boosted the dollar.

Crucially, Powell refused to provide any hints that there would be a cut in September as he firmly rebutted the calls from President Trump.

After an initial test of 1.3300, the Pound to Dollar (GBP/USD) exchange rate dipped sharply to 11-week lows just below 1.3230 before a tentative recovery to 1.3260 on Thursday.

The FTSE 100 index strengthened to a fresh record high in early trading which should provide some Pound support.

According to UoB; “Today, there is room for GBP to weaken further, but any decline is likely part of a lower range of 1.3210/1.3310. GBP is unlikely to break clearly below 1.3210 or above 1.3310.”


ING sees an overall risk of a retreat to 1.3150.

US data will continue to watched closely while traders will not be expecting any Bank of England comments ahead of Thursday’s policy decision.

There was no surprise surrounding the Federal Reserve policy decision with rates held at 4.50%.

Governors Waller and Bowman both dissented from the decision and called for a reduction in rates to 4.25%.

Given recent comments from the two, markets were expecting the dissents, but it was the first time two members voted against the decision for 30 years.

The central bank noted that the economy had lost some momentum, but added that the unemployment rate remains low while inflation remains somewhat elevated.

Fed Chair Powell adopted a hawkish stance in his press conference and refused to provide any hints that rates would be cut in September.


Looking beyond the dissenters, ING commented; “They believe they have time to wait, especially in light of the recent firmer-than-expected June jobs report, today’s above consensus GDP print and ongoing uncertainty about how inflationary the President’s tariffs will be.”

ING added; “the Fed was stung by criticism after suggesting the post-pandemic supply shock price hikes would be “transitory”, only for inflation to hit 9% in 2022. Most members will not have wanted to cut rates today on a hunch and only have to backtrack again if inflation remains persistent.”

Following Powell’s comments, markets cut the potential for a September rate cut to below 50% which underpinned the dollar.

National Australia Bank senior currency strategist Rodrigo Catril commented; "We've seen the classic correlation still holding, in the sense that we've seen a hawkish Fed push up front-end yields and the U.S. dollar, equities have struggled, and the credibility of the Fed has also been probably reinforced by the view that the Fed chair is still in command."

According to ING; “September is certainly possible, but with inflation likely to be pushed higher by tariffs over the next few months, we are unlikely to get confirmation of more benign month-on-month inflation prints until the October and November reports.”

In contrast, there are very strong expectations that the Bank of England (BoE) will cut interest rates next week.

The Pound, therefore, could remain vulnerable in the near term, although the outlook could become more complicated next week given the potential for a split BoE vote and upward revisions to inflation forecasts.

Markets are backing a further cut in November but, according to Pantheon Economics; "We think the Monetary Policy Committee will have to press pause after one more [August] cut. Six years of near-continuous inflation overshoots cannot be ignored.”

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TAGS: Pound Dollar Forecasts