Pound Sterling to Dollar Forecast: GBP/USD Holds Support, Eyes Break Above 1.36

Modified: Wednesday, 27 August 2025 08:30 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Holds Support, Eyes Break Above 1.36

The British Pound to Dollar (GBP/USD) exchange rate forecast turned more supportive this week as Sterling held above key support near 1.3450 and pushed back toward 1.35.

The US dollar remains under pressure after President Trump’s move to fire Fed Governor Lisa Cook sparked renewed concerns over central bank independence, with analysts warning that political risks could weigh heavily on the greenback.

GBP/USD Forecasts: Near 1.3500

The Pound to Dollar exchange rate (GBP/USD) found support below 1.3450 on Tuesday and rallied to 1.3490 around the US open.

Trump’s overnight announcement that he was firing Fed Governor Cook triggered an immediate dollar slide, but the currency attempted to mount a defence before sliding again.

The key question is whether the Pound can capitalise on the dollar's vulnerability and relatively high UK yields.

GBP/USD needs to break above 1.3600 to secure a more constructive outlook.

According to UoB; “there has been no clear increase in downward momentum, and instead of continuing to weaken, GBP is more likely to trade in a range today, probably between 1.3440 and 1.3520.”

President Trump cited allegations of impropriety surrounding the issue of declared principal housing residence as just cause for dismissing Cook.

Refusing to leave, she has denied the allegations, and there will inevitably be legal challenges.

It is very difficult to put a positive spin on developments for the dollar, especially with ongoing pressure to push rates lower.

According to ING; “Investors will naturally start to increasingly question the independence of the Fed, which would result in a steeper yield curve and a weaker dollar.”

MUFG added; "The renewed downward pressure on short-term U.S. yields combined with the increased threat to the Fed’s independence are both creating a negative backdrop for the U.S. dollar supporting our outlook for further weakness in the year ahead.”

Rabobank pointed to the wider Administration agenda; “The unabashed politicization of the supposedly independent and technocratic process of setting the price of money once again confirms that it is no longer the 1990s and that old ideas about optimal policy transmission, central bank credibility and the need to insulate important decisions from the influence of the popular will offers little protection against the new paradigm of raw power politics.”

Scotiabank pointed to other potential dollar risks surrounding Fed policy, with Dallas Fed President Logan warning over month-end money-market pressures.

According to the bank; “The topic warrants close attention given recent periods of money market turmoil, most notably in 2019 when turbulence forced 75bpts of easing in the meetings that followed.”

Domestically, the British Retail Consortium (BRC) reported that shop prices increased 0.9% in the year to March, the highest reading since March 2024 as a 4.2% increase in food prices offset a small decline in non-food prices. Inflation concerns will make it difficult for the Bank of England to cut rates again in the near term.

The latest COT data, released by the CFTC, recorded a decline in short, non-commercial Pound positions to near 25,000 from 33,000 previously, which suggests that unease over the Pound has lifted, at least for now.

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TAGS: Pound Dollar Forecasts