Pound Sterling to Dollar Forecast: GBP Firms as UK CPI Beats Predictions

Modified: Wednesday, 20 August 2025 14:15 BST - Written by Tim Boyer

STORY LINK Pound Sterling to Dollar Forecast: GBP Firms as UK CPI Beats Predictions

The Pound to Dollar exchange rate (GBP/USD) recouped overnight losses on Wednesday morning after the UK’s latest consumer price index exceeded expectations.

At the time of writing, GBP/USD was trading at $1.3498, having rebounded by more than 0.2% from an overnight low of $1.3462.

The Pound (GBP) edged higher on Wednesday after fresh UK inflation data came in above forecasts.

Headline CPI climbed to 3.8% in July, up from 3.6% and slightly stronger than the 3.7% markets had anticipated. Core inflation also moved unexpectedly higher, matching the 3.8% print.

The stronger readings fuelled expectations that the Bank of England (BoE) could take a more cautious stance on cutting interest rates in the near term, offering the Pound some support.

Even so, concerns remain that sticky inflation combined with elevated borrowing costs is straining public finances. Speculation is already building that the government may need to announce further tax rises in the autumn budget, which capped Sterling’s gains.

The US Dollar (USD) held its ground on Wednesday, with fading risk appetite helping the safe-haven currency avoid sharper losses.


Optimism earlier in the week around possible peace initiatives for Ukraine had lifted global sentiment, but with little concrete detail emerging, confidence soon began to wane. As caution returned to markets, demand for the ‘Greenback’ picked up.

That said, the US Dollar’s upside was constrained by investor caution ahead of key Federal Reserve events. The release of the Fed’s policy meeting minutes on Wednesday evening, followed by the Jackson Hole Symposium and Chair Jerome Powell’s address on Friday, kept traders on the sidelines.

As a result, the US Dollar saw subdued movement despite the shift in risk sentiment.

Looking ahead, Thursday’s release of the UK’s flash PMI surveys for August will be a key driver for the Pound. The services sector – the backbone of the UK economy – is expected to show steady growth, with forecasts pointing to an unchanged pace of expansion.

Such an outcome may offer Sterling only limited support, though any significant deviation from expectations could spark stronger moves in either direction.

Across the Atlantic, the S&P Global PMI surveys are also due. A slowdown in US services activity is anticipated, which may weigh modestly on the US Dollar. However, given these releases typically carry less influence than the ISM surveys, market reaction could be fairly restrained.

Instead, traders may pay closer attention to the latest US jobless claims data. Any rise in initial or continuing claims could dampen confidence in the ‘Greenback’, adding pressure on USD exchange rates.

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TAGS: Pound Dollar Forecasts