Pound to Dollar Forecast 2026: Gold and Yen Surge Expose USD Vulnerability

Modified: Tuesday, 27 January 2026 10:31 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast 2026: Gold and Yen Surge Expose USD Vulnerability

The Pound to Dollar exchange rate (GBP/USD) surged to fresh four-month highs above 1.3680 as the dollar slid sharply on yen intervention fears and another surge in gold prices, pushing the DXY index into a technically fragile zone.

GBP/USD Forecasts: Fresh 4-Month Best

The dollar posted sharp losses in New York trading on Friday and has lost further ground on Monday.

The Pound to Dollar (GBP/USD) exchange rate surged to a 4-month high just above 1.3680 before a slight correction

UoB commented; “We continue to expect a stronger GBP today, but given the deeply overbought conditions, any advance is likely part of a higher range of 1.3590/1.3700. In other words, GBP is unlikely to break clearly above 1.3700.

The bank notes that levels above 1.3700 are the September 2025 high of 1.3730 and the July 2025 peak at 1.3790.

There are no major UK data releases this week with global developments set to dominate GBP/USD moves.

The dollar slide was triggered to an important extent by a slump against the yen amid fears that central bank intervention to buy the yen was imminent. Overall dollar sentiment also remained negative while there was another surge in precious metals with silver and gold both jumping to fresh record highs.

MUFG commented; “The broad US dollar index (DXY) remains under downward pressure, having slipped below the 98.00 handle. The index now sits at a technically pivotal zone - any further deterioration risks opening the door to an extended phase of USD softness.”

Overnight, the Bank of Japan and Federal Reserve looked to check dollar positions against the yen. This is the final move before a potential move to actually intervene and buy the yen.

ING commented; “Suspected intervention to sell USD/JPY, plus US authorities reportedly getting involved, has prompted a near 3.5% drop since Friday morning. This is not a fundamentally driven dollar move, but the dollar risk premium can stay elevated.”

ING is not convinced that the dollar slide will continue; “away from the geopolitical risk premium being attached to US assets, the dollar's fundamental story has not deteriorated. Plus, we suspect this week's FOMC meeting could prove slightly dollar bullish.

It added; “for the dollar sell-off to continue like this, we will probably need to see some poor domestic US news. Away from the FOMC, this will heighten scrutiny on earnings releases from US Big Tech this Wednesday and Thursday.

The Fed will announce its interest rate decision on Wednesday with strong expectations that rates will be held at 3.75%.

Danske Bank commented; “We expect the Federal Reserve to maintain its monetary policy unchanged, in line with broad consensus and market pricing. The Fed will not publish updated projections, so the focus is strictly on Powell's remarks.”

From a longer-term view it added; “We maintain our forecast for two more Fed cuts, in March and June, slightly ahead of market pricing.”

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TAGS: Pound Dollar Forecasts