Dollar to Pound Forecast: "Expect the USD to lower in the coming days"

Published: Friday, 19 September 2025 09:00 BST - Written by David Woodsmith

STORY LINK Dollar to Pound Forecast: "Expect the USD to lower in the coming days"

The Pound to Dollar (GBP/USD) exchange rate briefly hit 11-week highs above 1.3700 on Wednesday following the Federal Reserve decision to cut interest rates but failed to hold the gains as the dollar fought back on position adjustment.

GBP/USD traded at 1.3660 ahead of the Bank of England (BoE) announcement before a retreat to test the 1.3600 area amid a wider Pound retreat after the decision.

According to UoB; “the odds of GBP rising to 1.3765 have diminished noticeably. However, only a breach of 1.3575 (no change in ‘strong support’ level) would indicate that GBP has moved into a range-trading phase.”

A break below 1.3575-1.3600 would trigger fresh doubts whether GBP/USD can secure further gains towards 2-year highs above 1.3790.

SocGen remains positive on the outlook; "GBP/USD broke above the neckline of an inverse head and shoulders pattern earlier this week, advancing toward 1.3725 before pulling back to the breakout level. The daily MACD remains in positive territory, indicating sustained upward momentum."

The Pound to Euro (GBP/EUR) exchange rate dipped to 1.1520 from 1.1540.

According to Danske Bank’s Kirstine Kundby-Nielsen the BoE will cut rates in November and February and added "With the ECB on hold and the euro area economy faring fairly well, that will push euro-sterling higher." (GBP/EUR losses)

Key GBP/EUR support remains in the 1.1480-1.1500 band.

XTB research director Kathleen Brooks commented; “The pound has backed away from the highs of the day so far on this news, although it remains mid-pack compared to the rest of the G10.”

The Bank of England (BoE) policy decision was in line with market expectations with rates held at 4.00%.

There was a 7-2 vote for the decision with Dhingra and Taylor voting for a further 25 basis-point cut to 3.75%.

The BoE also stated that there would be £70bn in gilt sales over the next 12 months after sales of £100bn over the past year.

The bank was still uneasy over underlying inflation trends and still expects that the headline rate will peak at 4.00% in the fourth quarter.

The bank, however, also noted that there was evidence of growing slack in the labour market.

Bank Governor Bailey continued to warn over the need for caution.

According to Bailey; We’re not out of the woods yet, so any future cuts will need to be made gradually and carefully.

The UK 10-year yield was little changed around 4.63% while markets continued to price in around a 25% chance of a November rate cut.

According to Deutsche Bank Chief UK economist Sanjay Raja; “Put simply, a Q4-25 rate cut remains very much on the table with the MPC doing little to shift market expectations one way or another.”

Danske’s Kundby-Nielsen commented; "There was an absence of hawkishness. They're not closing the door to a November cut, for example, and keeping this careful and gradual approach to easing.”

She added; "We expect cuts in November and then in February and then on hold from there. The disinflationary process is ongoing, the labour market will continue to weaken and growth will remain subdued. That is going to push them to keep cutting, just a bit more.”

Lloyd Harris, Head Of Fixed Income, Premier Miton Investors remains concerned over UK fundamentals; “Inflation remains stubborn at 3.8%, and wage growth at 4.7% keeps the pressure on. The UK is now the most stagflationary economy in the developed world. A brutal mix of high inflation, weak growth, and rising unemployment.”

Schroders senior economist George Brown was much less sanguine over the outlook for rates; “While markets are betting on rate cuts resuming next year, we remain doubtful this will materialise.

He added; “In our view, the balance of risks is drifting towards renewed tightening given persistent domestic inflationary pressures. We continue to expect rates to remain on hold this year and next, but we can’t rule out the possibility that the Bank’s next move will be up, rather than down.”

Overnight, the US Federal Reserve cut interest rates by 25 basis points to 4.25% which was in line with strong market expectations.

New Governor Miran voted for a 50 basis-point cut and one member, probably Miran, voted for aggressive cuts over the next year which dragged median expectations lower.

Overall, the Fed expects two further cuts this year, but only by a narrow margin with notably division and uncertainty.

ING commented; “We interpret yesterday’s Fed decision as a net negative for the dollar, and think that some 'sell the fact' and positioning readjustment have exacerbated the dollar rally during and after the presser. Expect the USD to lower in the coming days.”

The US economic data on Thursday was stronger than expected with initial jobless claims declining to 231,000 from 264,000 previously while the Philly Fed manufacturing index strengthened to 23.2 for September from -0.3 previously.

Companies remained optimistic over the outlook, but with further upward pressure on prices.

According to Standard Chartered; “A short-lived rebound in the US Dollar is probable as excessively dovish market expectations of Fed policy normalise in the short term. However, beyond this we expect downward pressure on the US Dollar to persist as Fed rates move lower over the remainder of 2025 and into early 2026.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts