Pound to Dollar Forecast 2026: USD Rebounds as Warsh Pick Halts GBP Rally

Modified: Sunday, 1 February 2026 10:16 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast 2026: USD Rebounds as Warsh Pick Halts GBP Rally

The Pound to Dollar exchange rate (GBP/USD) has retreated from 4-year highs after the dollar staged a rebound on speculation that Kevin Warsh will be nominated as the next Federal Reserve Chair, easing fears over political interference and triggering sharp position unwinds across FX and precious metals.

GBP/USD Forecasts: Retreat from 4-Year Highs

The dollar has been under strong pressure for much of the week, but staged a notable comeback on Friday.

The catalyst for the move was a report that President Trump would nominate Kevin Warsh as the next Fed Chair.

Warsh is in favour of lower interest rates and structural reform within the Fed, but he is seen as a guardian of independence and his nomination would lessen fears over political interference in Fed policy.

The dollar pared losses and there was a dramatic slide in precious metals after posting a series of record highs.

In this environment, the Pound to Dollar (GBP/USD) exchange rate dipped to lows at 1.3725 from 4-year highs above 1.3850 earlier in the week.

According to UoB; “if GBP breaks below 1.3710, it would mean that the advance that started last week has run its course.”

Position adjustment will be potentially important in the near term. According to ANZ head of Asia research Khoon Goh; "Any sensible market participant would not want to carry a big position into the weekend. So some of this could just be positioning lightening up. If you're short dollars, you've done well, take your chips off the table."

ING commented; “The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is likely to be announced as the new Federal Reserve Chair nominee today offers exactly that.”

The bank added; “Given how adamant Trump has been on reducing rates, it’s safe to assume Warsh has taken a more dovish stance during the interview process – but this pick may suggest a desire to calm speculation on Fed independence loss.”

According to ANZ head of Asia research Khoon Goh; "The appointment of Warsh, if it's true, will be seen as someone who can, in a way, remain independent, and not someone seen as likely to be subservient to Trump's wishes."

MUFG took a similar line on credibility; “Warsh is a strong advocate of Fed independence so fears over independence being eroded should recede which is also dollar supportive.”

Nevertheless, the bank added that credibility could be a double-edge sword; “That stronger credibility means Warsh stands a much better chance of swaying the rest of the FOMC in the direction he advocates and hence an initial period of rate cuts should actually now be viewed as more likely.”

It added; “with rate cuts potentially more likely to be delivered under a Warsh FOMC we suspect this initial bounce for the dollar will fade.”

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TAGS: Pound Dollar Forecasts