Pound to Dollar Forecast: GBP/USD Tests 1.3550 as Fed Cut Bets Mount

Modified: Thursday, 11 September 2025 09:00 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: GBP/USD Tests 1.3550 as Fed Cut Bets Mount

The Pound to Dollar (GBP/USD) exchange rate climbed above 1.3550 on Wednesday as softer US producer price data and firmer risk appetite underpinned Sterling.

Markets remain convinced the Federal Reserve will cut rates next week, though GBP/USD is still capped below key resistance at 1.3595.

Analysts are split: UoB sees the pair holding within its 1.3500–1.3595 range, while Scotiabank warns a breakout could open the door to July’s 1.3750 highs.

GBP/USD Forecasts: Can Pound Sterling Break Key Resistance?

The Pound to Dollar (GBP/USD) exchange rate found some support above 1.3500 on Wednesday and briefly traded above 1.3550 after weaker-than-expected US wholesale prices data.

The dollar has shown resilience, but the Pound has been underpinned by favourable risk conditions.

UoB commented; “Given that there is no decisive break above 1.3595, we continue to expect GBP to trade in a range for now.”

Scotiabank is notably positive on the outlook; “this week’s gains are threatening a push to levels last seen in early July. We see no major resistance ahead of 1.3750 and look to a near-term range bound between 1.3500 and 1.3600.”

US producer prices declined 0.1% for August compared with consensus forecasts of a 0.3% increase on the month with the year-on-year increase slowing to 2.8% from a revised 3.4%.

Markets remain convinced that the Federal Reserve will cut interest rates next week with the most likely outcome seen as a 25 basis-point cut, but traders are pricing in close to a 10% chance of a more aggressive 50 basis-point cut.

ING commented; “the market has become convinced the Fed will be cutting next Wednesday. Yesterday's big downward revision to the US jobs data cements that view.

Deutsche Bank notes underlying vulnerability to rate cuts; “It is stating the obvious that additional Fed cuts from here would increase incentives to hedge dollar assets by foreign investors.”

Credit Agricole notes that the dollar could be vulnerable if the currency trades in line with interest rate expectations.

It did, however, note; “we further note that, at the time of writing, US rates markets are already pricing in c.70bp of Fed easing in 2025, followed by another c.80bp in 2026. This is an excessively dovish outlook in our view and signals that many negatives are already in the price of the USD.

Overnight, a court blocked the immediate firing of Fed Governor Cook, although this will inevitably be referred to higher courts.

On Wednesday, the Senate Banking Committee will hold a hearing on Miran’s nomination to be a Fed Governor. Assuming this passes along party lines, there will be a full Senate vote next week with expectations that he will be confirmed in time to vote next week.

Scotiabank commented; “Something else that did not change was White House criticism of the BLS and the administration’s criticism of the Fed.”

There have been no major UK fundamental developments during the day, but equities have held a firm tone which has helped underpin the Pound in global markets.

Scotiabank maintains a positive outlook on the Pound; “Fundamentals remain supportive for the pound as UK-US yield spreads push to fresh highs and sentiment is confirming as the options market reveals a positive shift in the price of protection against GBP risk.”

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TAGS: Pound Dollar Forecasts