Pound Sterling to Dollar Forecast: Analysts Warn GBP Gains Limited Before Fed Cut

Modified: Tuesday, 9 September 2025 08:00 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: Analysts Warn GBP Gains Limited Before Fed Cut

The Pound to Dollar (GBP/USD) exchange rate found support below 1.3500 on Monday and pushed towards 1.3540, helped by softer US bond yields and a weaker dollar index at 6-week lows. Analysts see Sterling locked in a near-term range, with momentum capped below 1.3590 ahead of the September Federal Reserve decision.

GBP/USD Forecasts: Range-Bound for Now

UoB said;

“Coming off the previous steep decline, the sharp rebound did not translate into a meaningful build-up in upward momentum. Overall, we view the current price movements as part of a broad range, likely between 1.3430 and 1.3595.”

Scotiabank echoed the range view;

“We look to a near-term range of 1.3480 and 1.3580.”

Both banks see a decisive break above 1.3590 as crucial for GBP/USD to build a stronger rally.

Weaker US jobs data last week reinforced expectations that the Fed will cut rates in September, with markets pricing a 10% chance of a larger 50-point cut.

MUFG commented;

“There is clear evidence that the US labour market deteriorated sharply after President Trump’s Liberation Day tariffs announcement in April.”

Danske Bank was more cautious;

“While political pressure to accelerate policy easing inarguably complicates the outlook, we think risks are skewed towards slower, rather than faster, rate cuts given the risk of more persistent inflation.”

ING noted potential for a short-term dollar bounce;

“We think the US corporate tax payment deadline of 15 September could provide the dollar with some support this week. Seasonally, the dollar does OK in September. We suspect that the DXY could be driven a little higher this week, before a bearish switch into next Wednesday's FOMC meeting.”

UK fiscal pressures remain in focus after the sharp rise in gilt yields earlier this month.

Rabobank warned;

“Fixing bloated fiscal positions without clobbering the economy and simultaneously finding ways to finance spending priorities has become a policy paradox. Is it simply ‘too late’ to fix? Or can out of the box economic thinking still find a solution?”

Scotiabank’s Shaun Osborne noted some upside for Sterling sentiment after the cabinet reshuffle;

“Markets appear to be endorsing the change, and risk reversals in the options market are showing signs of a shift following their recent dramatic (bearish) turn.”

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TAGS: Pound Dollar Forecasts