Pound to Dollar Forecast: GBP to "Range Trade", USD Outlook Under Pressure

Published: Tuesday, 2 September 2025 08:00 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: GBP to "Range Trade", USD Outlook Under Pressure

The Pound to Dollar outlook (GBP/USD) has turned more positive, with the pair climbing to two-week highs around 1.3540 on Monday.

The latest exchange rate forecast suggests Sterling could test 1.36 as political turmoil, Fed independence fears, and uncertainty over Trump’s tariffs keep the dollar on the defensive. Investors are now focused on this week’s US jobs report and Bank of England commentary to set the next direction.

GBP/USD Forecasts: 2-Week Highs

The Pound to Dollar exchange rate (GBP/USD) has strengthened to 2-week highs at 1.3540 in Europe on Monday.

The dollar remained firmly on the defensive on Monday amid underlying fears surrounding Fed independence and fresh uncertainty surrounding President Trump’s tariffs.

Gold strengthened to near record highs and the Chinese yuan also posted gains with both elements a symptom of dollar weakness.

Key GBP/USD resistance comes in around 1.3590.

According to UoB; “GBP is likely to continue to range-trade, but a narrower range of 1.3420/1.3560 is likely enough to contain the price movements for now.”

US developments are likely to dominate during the week, although comments from the Bank of England will be watched closely.

ING expects a hawkish BoE stance and added; “This could leave GBP/USD in a position to test 1.3600 this week. Still, a break above there may be hard to sustain since our house view remains for a 25bp rate cut in November.”

US economic data will certainly be a key element this week with a series of jobs-related data including the crucial employment report on Friday following last month’s bombshell release.

Consensus forecasts are for a headline increase in non-farm payrolls of around 75,000 for August with the unemployment rate ticking higher to 4.3% from 4.2%, equalling the highest reading since November 2021. Data revisions will also be important.

Markets are pricing in over an 85% chance of a September rate cut.

According to MUFG; “another much weaker than expected nonfarm payrolls report on Friday could encourage expectations for the Fed to resume rate cuts with a larger 50bps cut weighing more heavily on the US dollar.”

ING added; “ING's call is for three Fed rate cuts this year versus just 56bp of easing currently priced. If we're right, this week's jobs data could add to downside for short-term US rates and the dollar.”

Very strong data could trigger fresh doubts over a September move, although there will inevitably be question marks over the data following the firing of the BLS head after last month’s data.

Commerzbank Head of FX and Commodity Research Thu Lan Nguyen considers that President Trump’s attempts to fire Fed Governor Cook pose a major threat to the dollar.

According to the bank; “For those already uncomfortable with the attacks and outbursts against the Fed Chair and his colleagues now, just imagine what the situation would look like if inflation rises and the central bank signals the need for rate hikes."

Nguyen is surprised that there has not been a bigger market reaction and puts it down to optimism that the checks and balances in the US constitution will be maintained.

As far as the Bank of England is concerned, ING commented; “we hear from a group of BoE members this Wednesday, testifying to the Treasury Committee. Presumably, they will mostly repeat their hawkish position, which sees the market pricing only 10bp of BoE rate cuts this year.”

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TAGS: Pound Dollar Forecasts