GBP/USD Forecast: Pound Sterling Challenges 1-Week Best

Modified: Thursday, 7 August 2025 07:00 BST - Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Challenges 1-Week Best

The US Dollar lost ground on Wednesday with markets continuing to fret over threats to Fed independence as traders brace for an announcement on the Fed vacancy and potential central bank chair.

The Pound underperformed other major currencies amid weak data and a fresh outbreak of unease surrounding the threat of further tax increases.

Overall, the Pound to Dollar exchange rate (GBP/USD) challenged 1-week highs at 1.3330.

According to Scotiabank; “The daily GBP chart reflects the same bullish reversal signal against the USD Friday that other charts reflect but Cable is lagging somewhat. Spot gains through Monday’s 1.3330 high may lift spot to the upper 1.33s (1.3365 resistance)”

UoB is not convinced that GBP/USD can break higher; “We continue to expect range trading, but the firmer underlying tone suggests a higher range of 1.3270/1.3320.”

The dollar has come under renewed pressure ahead of a President Trump announcement on his nomination to fill the vacancy.

There is also further speculation that this nominee will be Trump’s choice to be the next Fed chair.


Scotiabank expects the dollar will remain vulnerable; “Following the USD’s July consolidation/rebound, we think it is prone to renewed losses as investors confront the rising risk of slowing US growth momentum, easier Fed policy and have to consider the potential for politics to cast a shadow over monetary policy and data reporting moving forward.”

Domestically, the UK construction PMI index dipped sharply to 44.3 for July from 48.8 previously, and well below consensus forecasts of 48.9 and the weakest reading since May 2020.”

Joe Hayes, Principal Economist at S&P Global Market Intelligence commented; "Having trended upwards in recent months, our survey data for July signal a fresh setback for the UK construction sector,

In its latest report the National Institute for Economic and Social Research (NIESR) forecasted that by the government was on track to miss its fiscal rules by £41.2bn by the end of this parliament.

The NIESR also considers that the government will have to raise taxes to bridge the gap.

There are strong expectations that the Bank of England will cut interest rates by 25 basis points to 4.00% on Thursday.

There are reservations surrounding both growth and inflation trends.


According to Monex; "That backdrop argues for cautious messaging, and we expect the MPC to stress a 'gradual and careful' approach, an outcome that should have little impact on sterling."

It did add; "Nevertheless, any surprise dovishness or signals that tax rises in the autumn budget will weigh on growth could trigger a sell-off for the pound."

Bank of America considers that Pound pessimism is overdone; “we have been increasingly perplexed by what we see as markets engineering a narrative to suit a bearish view on GBP. We think the pessimism has been excessive, leaning more heavily on politics and social media rather than what matters: macro.”

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TAGS: Pound Dollar Forecasts