Pound to Dollar Forecast: GBP Tipped to Break 1.38 Against USD

Modified: Monday, 1 September 2025 10:30 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Tipped to Break 1.38 Against USD

The Pound to Dollar exchange rate (GBP/USD) traded steadily around 1.35 last week, but the outlook is shifting as UBS forecasts a break above 1.38 with scope to challenge 1.40.

Dollar sentiment remains fragile amid growing fears over Federal Reserve independence, with President Trump locked in legal battles over control of the central bank.

Analysts remain divided, with UBS highlighting UK rate-cut delays as a source of Pound support, while HSBC warns that looming tax hikes could weigh on Sterling’s longer-term outlook.

GBP/USD Forecast: Fed Fears

UBS expects the Pound to Dollar (GBP/USD) exchange rate will break above 1.38 and challenge the key 1.40 area

GBP/USD was little changed during the week and traded around 1.35.

According to UBS Bank of England policy will be a key element; “the risk of a delay of the next rate cut has risen. This should lend further carry support to the GBP over the coming months.”

HSBC, however, remains cautious over the UK outlook; “With Labour backbench MPs against spending cuts and bond markets constraining new borrowing, chancellor Rachel Reeves is expected to raise taxes. News reports have speculated on a range of potential measures, including a possible surcharge or levy on banks that might hurt economic growth and weigh on GBP.”

Dollar developments are likely to dominate in the short term, especially with another key jobs report at the end of this week.

The Administration is continuing to push strongly for the Federal Reserve to cut interest rates.

President Trump is also engaged in a legal battle to fire Fed Governor Cook as well as gaining greater control of the central bank. The dispute is heading for the Supreme Court and the issue of reciprocal tariffs is also heading for the highest court after an appeals court ruled against the Administration.

Rabobank commented; “The administration is reportedly looking for ways to offer positions at the helm of regional banks as consolidation prize to those candidates who do not get selected as Powell’s replacement. It has not become clearer how Trump plans to achieve this exactly – or if he can. But the broadening of Trump’s attacks on the Fed should be more concerning.”

Scotiabank commented; “The USD has given back much of the July rebound over the course of August and we anticipate more losses in the months ahead behind easier Fed policy and investor convers over challenges facing US institutions.

There is a risk of unintended consequences which could damage the economy.

Commonwealth Bank of Australia currency strategist Carol Kong commented; "If markets perceive the FOMC’s independence as compromised, inflation expectations could become unanchored, driving long term interest rates higher."

BNP Paribas considers that the Fed may have to compromise to avoid serious destabilisation; “Defusing a frontal clash with the White House, and thereby reducing the risks of an FOMC that would pursue overly stimulative monetary policy during that window, is the best way to entrench the soft landing Powell’s Fed has so far delivered.”

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TAGS: Pound Dollar Forecasts