Pound to Dollar Forecast: "Upside From Here With Year-end Target of 1.39"

Modified: Thursday, 21 August 2025 22:15 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: "Upside From Here With Year-end Target of 1.39"

The Pound to Dollar exchange rate (GBP/USD) was unable to attack the 1.3500 level on Thursday and retreated to 1.3440.

The US data releases triggered some fresh doubts whether a near-term Fed rate cut was justified and this offset the impact of slightly better than expected UK data.

According to UoB; “the price action remains soft, and the risk is still tilted to the downside. However, the major support at 1.3415 is probably still out of reach for now.”

Scotiabank added; “We look to a near-term range bound between 1.3420 support and 1.3520 resistance.

UBS is still positive on the outlook; "We expected a temporary consolidation of the strong GBP/USD rally. This has now played out, and we see more upside from here with a year-end target of 1.39."

US initial jobless claims increased to 235,000 in the latest week from 224,000 previously while continuing claims increased to 1.97mn from 1.94mn.

The Philadelphia Fed manufacturing index dipped sharply to -0.3 from 15.9 previously and below consensus forecasts of 6.5 while there was further upward pressure on costs and price received.


The US PMI manufacturing index strengthened to a 39-month high of 53.3 for August from 49.8 previously and above consensus forecasts of 49.7 while the services-sector index edged lower to 55.4 from 55.7.

Cost pressures remained strong as tariffs continued to have an important impact while prices charged for goods and services rose at the sharpest rate since August 2022 as firms passed higher costs on to customers.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence: “A strong flash PMI reading for August adds to signs that US businesses have enjoyed a strong third quarter so far.

He noted that inflation is liable to push headline inflation further above the 2% level and added; “Indeed, combined with the upturn in business activity and hiring, the rise in prices signaled by the survey puts the PMI data more into rate hiking, rather than cutting, territory according to the historical relationship between these economic indicators and FOMC policy changes.”

Following the PMI data, markets are now pricing in around a 75% chance of a September Fed rate cut.

If inflation concerns become more prominent and Fed Chair Powell plays down the potential for a near-term rate cut, the dollar could gain further support.

There will, however, still be concerns over threats to Fed independence which will continue to pose an important dollar threat.


Earlier, the Pound drew net support from the UK PMI data with the composite index strengthening to a 12-month high.

July government finances data was also better than expected with the shortfall held to £1.1bn from £3.4bn the previous year.

Scotiabank commented; “UK fiscal developments remain a core concern for markets, as evidenced by recent bond market turbulence and an intensified focus on the Chancellor’s plans for the Autumn Statement.”

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TAGS: Pound Dollar Forecasts