Pound Sterling to Dollar Forecast: GBP Peaks Below 1.40 Despite USD Risks

Modified: Tuesday, 26 August 2025 09:00 BST - Written by Ben Hughes

STORY LINK Pound Sterling to Dollar Forecast: GBP Peaks Below 1.40 Despite USD Risks

The Pound to Dollar exchange rate (GBP/USD) remains capped despite renewed Sterling strength, with RBC Capital Markets forecasting a peak just below 1.40 and Standard Chartered limiting 12-month gains to 1.37.

GBP/USD rebounded to 1.35 after Fed Chair Jerome Powell’s dovish Jackson Hole speech boosted expectations of a September rate cut, but analysts caution that UK fundamentals remain fragile while US political pressure on the Federal Reserve continues to cast uncertainty over the US Dollar outlook.

GBP/USD Forecasts: Fundamental Troubles for Both

RBC Capital Markets expects that the Pound to Dollar (GBP/USD) exchange rate will peak just below 1.40 despite being negative on the dollar outlook.

Standard Chartered expects 12-month GBP/USD gains will be held to 1.37.

GBP/USD dipped to 2-week lows just below the 1.3400 level during the week before recovering strongly to above 1.35 as Fed Chair Powell’s comments triggered a fresh surge in expectations surrounding a September US interest rate cut.

ANZ expects a near-term rate cut; “Downside risks to the labour market have risen, and weak hiring momentum poses upside risks to the unemployment rate. A declining participation rate in recent months has helped to keep the unemployment rate low. We think the resumption of easing in September and a gradual easing cycle are appropriate. We expect the FOMC will cut rates by 25bp at the 16-17 September meeting.”

Markets are also still wary over attacks on the central bank by the Administration with on-going fears that the central bank will be politicised to acquiesce in the push for sharply lower interest rates.

This week, Trump called for the resignation of Fed Governor Cook over allegations of financial misconduct.

ING commented; “The renewed threat this morning from President Trump to fire Fed governor Lisa Cook (for allegedly falsifying bank documents) is another ingredient to consider, as the Trump quest to morph the Fed dovish continues.”

MUFG added; “President Trump’s post this week calling for another Fed official to resign, this time Governor Lisa Cook rather than Chair Jerome Powell, highlights the continued political pressure on the Fed to cut rates. A development that poses bigger downside risks for the USD next year.”

RBC maintains a bearish dollar stance; “Long-term, RBC’s view of structural USD weakness remains unchanged. Foreign managers are expected to hedge their USD assets more aggressively, which will exert sustained downward pressure on the dollar in 2025 and throughout 2026.”

It added; “This long-term trend is rooted in structural shifts rather than short-term market fluctuations, reinforcing the idea that the USD’s depreciation is a multi-year process driven by fundamental factors.

The UK inflation rate edged higher to 3.8% for July from 3.6% previously with the core rate also at 3.8%.

The PMI data was mixed, but the services-sector index hit a 12-month high while there was a lower-than-expected government borrowing requirement for July.

RBC remains bearish on the Pound due to underlying fundamental vulnerability; “there are risks to the sterling outlook in the medium-term. We have lingering fears that the UK labour market is continuing to weaken, although data quality issues cloud the picture. The vacancy data which is more immune to these issues is showing considerable weakness.”

It added; “Furthermore, unlike the euro area or Japan, the UK has a negative net international investment position with the rest of the world.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts