Pound Sterling to Dollar Forecast: GBP Stalls Below 1.35 as USD Holds Firm

Published: Wednesday, 14 January 2026 11:00 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Dollar Forecast: GBP Stalls Below 1.35 as USD Holds Firm

The Pound to Dollar exchange rate has been unable to regain ground above 1.35, as geopolitical developments and global risk considerations continue to dominate trading.

With UK fundamentals taking a back seat, GBP/USD remains range-bound while markets await clarity on US policy risks.

GBP/USD Forecasts: Held Below 1.3500

The Pound to Dollar (GBP/USD) exchange rate has been unable to move back above the 1.3500 level and settled around 1.3470 after the New York open.

Ranges have been relatively contained despite major underlying concerns and uncertainties.

Geo-political stresses remain substantial, especially with markets waiting for President Trump’s response on the Iran situation.

Overnight Trump threatened to impose 25% tariffs on countries which trade with Iran which is liable to trigger fresh tensions with China.

The overall dollar performance has been mixed while there has been further demand for precious metals with gold and silver posting fresh record highs. There have not been any major UK developments ahead of the latest UK GDP data on Thursday.

Monex Europe head of macro analysis Nick Rees commented; "It's less to do with UK fundamentals – which we still think are weak – it's rather that events elsewhere are providing a distraction from Britain's problems."

UoB commented; “The price action suggests that GBP is likely in a range-trading phase, probably between 1.3390 and 1.3520.”

MUFG expects limited GBP/USD gains to 1.38 at the end of 2026.

The headline US inflation rate was unchanged at 2.7% for December and in line with consensus forecasts. Core prices increased 0.2% on the month with the annual rate holding at 2.6% compared with market expectations of a slight uptick to 2.7%.

Markets are pricing in less than a 30% chance of a March Fed rate cut after no change in January, limiting scope for dollar selling.

There is still a high degree of concern surrounding Fed independence, although the market impact has been limited.

Traders are waiting for further news on the legal action against Chair Powell and the choice of next Fed Chair.

Scotiabank commented; “As President Trump continues to mull his pick to replace Powell, investors appear surprisingly calm in the face of the apparent risks facing the Fed’s policy independence.”

Domestically, markets will be on alert for comments from Bank of England (BoE) officials.

Deputy Governor Ramsden and external member Taylor are due to speak on Wednesday.

Both members have been relatively dovish members on the committee and the Pound will be vulnerable if Ramsden backs another immediate rate cut.

According to Scotiabank, there is scope for the disappointment surrounding central bank policy; “BoE rate expectations are steady following their recent pullback with markets still pricing at least one 25bpt cut by June and nearly 50bpts by December. We see risks titled to less easing than what is currently priced and look to GBP support as markets pare back their expectations for cuts.”

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