Pound to Dollar Forecast: Sterling Struggles Near Two-Week Lows

Modified: Tuesday, 23 September 2025 10:30 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: Sterling Struggles Near Two-Week Lows

The Pound to Dollar exchange rate (GBP/USD) dipped to two-week lows just above $1.3450 on Monday before stabilising near the $1.3500 level, with Sterling struggling to mount a stronger rebound.

Dollar gains proved difficult to sustain in global markets, but underlying Pound sentiment remained fragile amid ongoing unease surrounding the UK’s fiscal outlook.

According to UoB:

“The likelihood of GBP breaking clearly below 1.3430 will increase in the coming days as long as it holds below the ‘strong resistance’ level, currently at 1.3565.”

MUFG also maintained a negative stance on the Pound, citing fiscal concerns and the risk of a renewed slide in bond markets.

According to the bank:

“The 30-year gilt yield appears to have bottomed at just above 5.4%. Furthermore, the release of further disappointing UK public finances data will add to concerns over the need for the government to outline significant fiscal tightening measures in the Autumn Statement set to be delivered in late November.”

It added:

“The looming prospect of further tax hikes will dampen the outlook for growth in the UK and encourage the UK rate market to price in more BoE easing for next year.”

According to Rabobank:

“The markets remain squarely focused on the UK’s difficult budget position rather than the pomp of a UK state occasion.”

Citi UK economist Callum McLaren-Stewart was similarly downbeat:

“With inflation still to peak and budget uncertainty there is scope for downside here and the services PMI looks too strong for us.”

The UK is not the only country facing fiscal strains. In the US, the Administration and Congress remain embroiled in another battle to avoid a government shutdown.

Scotiabank commented:

“In terms of risks, we remain concerned about the looming threat of a US government shutdown, given the lack of congressional progress on passing the Republicans’ stopgap bill.”

It added:

“Democrats appear to be threatening a shutdown as they seek to address concerns about health care, specifically tax credits for ACA purchased insurance, as well as demands for spending on funds appropriated for foreign aid and media subsidies.”

British Pound to Dollar Forecast: Fiscal and Fed Risks Ahead

Looking ahead, fiscal risks on both sides of the Atlantic are likely to remain central to GBP/USD moves. UK borrowing pressures and the prospect of tax hikes continue to cast a shadow over Sterling, while political brinkmanship in Washington could weigh on the Dollar.

Markets will also track Federal Reserve commentary closely, with divisions on further easing set to be highlighted by a busy week of speeches. On Monday, Atlanta Fed President Raphael Bostic said he saw little reason to cut rates further for now, underscoring the uncertain policy outlook into year-end.

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TAGS: Pound Dollar Forecasts