Pound Sterling to Dollar Forecast: GBP/USD Tests Upper Ranges

Modified: Friday, 23 January 2026 15:16 BST - Written by Ben Hughes

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Tests Upper Ranges

The Pound-to-Dollar exchange rate (GBP/USD) has pushed to 1.3535, as foreign exchange analysts at ING and MUFG argue that confidence in US policymaking has not fully recovered, keeping the risk of renewed “Sell America” flows alive despite calmer headlines.

GBP/USD Forecasts: Tight Ranges

The Pound to Dollar (GBP/USD) exchange rate has been held in relatively narrow ranges and trading around 1.3440 after again finding support near 1.34 with Pound support from a boost to risk appetite offset by a firmer dollar.

According to UoB; “we continue to expect range-trading today, most likely between 1.3400 and 1.3460.”

Given major global pressure points, it is dangerous to assume that narrow ranges will prevail.

According to ING; “Some downside risks for the dollar persist: more volatility in JGBs spilling into Treasuries, scrutiny on upcoming US tech earnings, reignition in geopolitical/tariff risk. But the macro picture should favour a bit more dollar strength in the coming days, in our view.”

Risk appetite secured an initial boost on Wednesday following President Trump’s comments that he would not use force to secure a deal on Greenland.

There was a further boost to confidence after the European close after Trump stated that a deal on Greenland had been reached with NATO Secretary-General Rutte and that the threatened tariffs on eight European countries from February 1st would not go ahead.

Markets were concerned that US threats would trigger selling in US bonds and equities which would hurt the dollar. With the immediate threat easing, there was a rebound in the dollar.

Commerzbank forex strategist Volkmar Baur commented; "From a European perspective, it is too early to rejoice."

He added; “However, the most likely outcome is still that the next wave of excitement will pass us by after a brief period of volatility and that the market will refocus on central banks and interest rate differentials."

ING considers that attention will turn towards the Federal Reserve policy decision next week.

According to the bank; “We discussed last week how Powell's fierce response to the criminal investigation signalled upside risks to the dollar, as he and other members could have turned more hawkish in a meeting without any rate change to reinforce the independence message.”

The Supreme Court also held a hearing on the US Administration case to dismiss Fed Governor Cook. The initial signs are that the court is not mindful to back Trump due to the threat to Fed independence.

MUFG still sees dollar risks, but added; “The loss of confidence in US policymaking is likely to remain a headwind for the US dollar as we have seen at the start of this year. However, the risk of a sharper US dollar sell-off has diminished after President Trump’s quick climb down over Greenland, and early indications from the Supreme Court overnight that they are likely to rule against President Trump’s decision to fire Fed Governor Lisa Cook.”

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TAGS: Pound Dollar Forecasts