Pound Sterling to Dollar Forecast: Festive Mood Lifts GBP/USD Toward 2026

Modified: Tuesday, 23 December 2025 20:16 BST - Written by Tim Boyer

STORY LINK Pound Sterling to Dollar Forecast: Festive Mood Lifts GBP/USD Toward 2026

The Pound to US Dollar exchange rate (GBP/USD) pushed past the $1.35 mark on Tuesday, rising to its strongest level since the end of September.

At the time of writing, GBP/USD was trading near $1.3501, up around 0.3% from Tuesday’s opening levels.

The US Dollar (USD) softened broadly on Tuesday, even after US GDP data surprised sharply to the upside.

Markets had expected growth to cool in the third quarter, with forecasts pointing to a slowdown from 3.8% to 3.3% amid concerns that President Donald Trump’s tariff policies were beginning to weigh on activity.

Instead, figures from the Bureau of Economic Analysis showed the US economy expanded by a robust 4.3% between July and September, driven by stronger consumer spending as well as renewed momentum in exports and government outlays.

Rather than lifting the Dollar, the data reinforced a risk-on market backdrop, prompting investors to rotate away from safe-haven assets.

The release also failed to shift expectations for US monetary policy, with markets continuing to price in multiple Federal Reserve interest rate cuts over the course of 2026.

The Pound (GBP) also advanced on Tuesday, benefiting from the typically upbeat sentiment associated with the year-end ‘Santa rally’.

Thin liquidity conditions during the holiday period appeared to amplify Sterling’s gains, as an optimistic market mood favoured risk-sensitive currencies.

Beyond seasonal effects, the Pound drew modest support from tentative optimism around the UK’s medium-term outlook. While recent inflation and growth data point to near-term challenges, some investors are increasingly hopeful that conditions could improve into 2026 as global growth steadies and policy uncertainty eases.

GBP/USD Exchange Rate Forecast: Can Festive Risk Appetite Keep Sterling Supported?

Looking ahead, with no major UK or US economic releases scheduled, movement in GBP/USD is likely to remain closely tied to broader market sentiment.

If festive optimism continues to underpin risk appetite, the Pound to US Dollar exchange rate may be able to extend its upward momentum into the Christmas period.

However, any sudden shift in mood or external geopolitical headlines could quickly reintroduce volatility.

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TAGS: Pound Dollar Forecasts