Pound to Dollar Week Ahead Forecast: Sterling Faces Resistance

Modified: Monday, 22 September 2025 10:15 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: Sterling Faces Resistance

The British Pound and US Dollar swung sharply last week as the GBP/USD exchange rate hit two-month highs above 1.37 before slipping under 1.35.

A Fed rate cut to 4.25% contrasted with the Bank of England holding at 4.00%, while UK fiscal worries resurfaced.

Nordea forecasts the Pound-to-Dollar rate climbing to 1.46 by 2026, though Macquarie sees GBP/USD capped below 1.40 next year.

GBP/USD Forecasts: Which Fed will dominate?

Nordea forecasts that the Pound to Dollar (GBP/USD) exchange rate will strengthen to 1.46 at the end of 2026 as the dollar posts further losses and the Pound secures net gains

Macquarie expects that GBP/USD will be capped at 1.40 and trade below this level at the end of next year.

Central bank policy decisions met market expectations as the Federal Reserve cut interest rates by 25 basis points to 4.25% while the Bank of England (BoE) held rates at 4.00%.

GBP/USD briefly hit 2-month highs above 1.37 before sliding below 1.35 amid a dollar rebound and fresh unease surrounding UK fundamentals.

According to updated forecasts, the median projection is for two further Fed rate cuts this year, although there are splits on the committee.

ING commented; “Despite Powell’s cautionary tone, the FOMC has clearly shifted to a dovish stance where it sees multiple cuts, and the focus is now firmly on the employment side of the mandate.”

For the remainder of this year, it added; “Our call is for two more 25bp cuts this year, and we see the cheapening of the dollar’s funding cost as driving more depreciation in an already seasonally weak end of the year for the greenback.”

Nordea sees important risks surrounding Fed policy, especially given threats to independence; “The slightly more dovish Fed we are looking at right now seems likely to cut a few times more before it understands that realizing the median FOMC forecast in a tight labour market with higher goods price inflation is a bad idea.”

It added; “If Trump loyalists were to dominate FOMC, we could also see a much more aggressive easing cycle than we have in our forecasts now.”

The BoE is still concerned over stubborn inflation and markets are pricing in around a 25% chance of a November cut

Paul Dales, chief UK economist at Capital Economics is notably cautious; “the Bank of England reiterated its concerns over rising inflation. As a result, we continue to think the Bank won’t cut rates again until February.”

The BoE decision was over-shadowed by a much larger than expected Budget deficit for August which reignited unease over fiscal policy.

According to Macquarie; “Fiscal concerns occasionally make their presence felt and, when they do, the spectacle of sterling selling off in tandem with rising yields can be unsettling.”

It added; “The UK's Autumn Budget on 26th Nov is a major near-term obstacle though. Sterling's recent advance against the US dollar should now grind to a halt until that is out of the way.”

RBC commented; The macroeconomy has proven to be resilient in the UK so far this year. If that holds up in the medium-term, sterling is perhaps not as unattractive as many people think.”

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TAGS: Pound Dollar Forecasts