Pound to Dollar Forecast: Sterling Climbs as Fed Set to Cut Rates

Modified: Wednesday, 17 September 2025 09:00 BST - Written by Ben Hughes

STORY LINK Pound to Dollar Forecast: Sterling Climbs as Fed Set to Cut Rates

The Pound to Dollar exchange rate (GBP/USD) jumped to 1.3640, its highest in two months, as dollar weakness outweighed steady UK jobs data.

Traders now look to Wednesday’s Fed decision, with a 25bp cut almost fully priced in. Will a 50bp cut surprise currency markets?

GBP/USD Forecasts: Sterling Holds 1.36

The US Dollar retreated further on Tuesday while the UK jobs data was broadly neutral for the Pound Sterling.

The Pound to Dollar (GBP/USD) exchange rate took advantage of dollar losses and strengthened to a 2-month high at 1.3640.

The outlook will remain positive if it can hold above the 1.3600 area which has been acting as important resistance.

ING commented; “barring a big downside shock to tomorrow's August CPI data, we think Thursday's BoE event risk could be sterling positive too. We've got a year-end target for GBP/USD at 1.38, which could be met a little sooner.”

The UK unemployment rate held at a 4-year high of 4.7% in the three months to July, in line with consensus forecasts.

There was a 6,000 decline in payrolls for July and, according to the ONS, there was a provisional decline of 8,000 for August.

ONS director of economic statistics Liz McKeown commented; “The labour market continues to cool, with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period.

She added; “Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards.”

Headline average earnings increased 4.7% over the year, in line with consensus forecasts while underlying earnings growth slowed to 4.8% from 5.0% and also met market expectations.

There are very strong expectations that the BoE will leave rates on hold at this week’s policy meeting and the jobs data will not shift these expectations.

ING noted; “Private sector employment fell further in August, which should help take wage growth below 4% by year-end. That keeps the door open to further Bank of England easing, though our call for a November rate cut hangs in the balance.”

The dollar overall remains under pressure in global markets with the currency index at 2-month lows.

There are very strong expectations that the Federal Reserve will cut interest rates on Wednesday with traders pricing in a 96% chance of a 25 basis-point cut.

According to Danske Bank, the Fed should be cautious; “Healthy wage growth, gradually building tariff costs, sharp easing in financial conditions and still elevated inflation expectations all support the case for only a gradual cutting cycle.”

There are, however, also concerns over greater political interference.

Overnight, the US Senate approved the nomination of head of the White House's Council of Economic Advisers Miran as a Fed Governor by a 48-47 vote. He will take part in the Fed meeting which starts Tuesday and potentially vote for a larger cut.

The most likely outcome is still that a majority will back a smaller cut, but there could be three dissenting votes which could have an impact on market sentiment and there would be a difficult press conference for Chair Powell.

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TAGS: Pound Dollar Forecasts