Pound to Dollar Week Ahead Forecast: 1.40 Back in Focus

Modified: Monday, 2 February 2026 07:31 BST - Written by Ben Hughes

STORY LINK Pound to Dollar Week Ahead Forecast: 1.40 Back in Focus

The Pound to Dollar exchange rate (GBP/USD) has seen a dramatic surge in volatility after racing to four-year highs above 1.38 before pulling back sharply as the US dollar attempted to stabilise.

Conflicting signals over US currency policy, Federal Reserve independence and the nomination of Kevin Warsh as the next Fed Chair have left markets sharply divided on whether GBP/USD is heading for 1.40 or a deeper correction.

GBP/USD Forecasts: Volatility surges

According to Scotiabank the Pound to Dollar (GBPUSD) exchange rate; “retains a bullish technical undertone and gains remain on track for a push above the 1.40+ area in the coming months.”

It added; “We still believe that gains above 1.41 will pave the way for additional GBP strength towards 1.4475.”

BNP Paribas maintains a negative stance on the Pound and forecasts that GBP/USD will slide to 1.30 at the end of 2026.

The Pound to Dollar (GBP/USD) exchange rate surged to 4-year highs above 1.3850 during the week as the dollar came under sustained pressure before a correction to near 1.3720 as the dollar attempted to recover.

The dollar came under sharp selling pressure amid speculation that it would look for a weaker currency to help underpin the manufacturing sector.

Treasury Secretary Bessent reiterated that the US still had a strong dollar policy which provided some relief.

The Federal Reserve held interest rates at 3.75% and, late in the week President Trump nominated Kevin Warsh as the next Fed Chair.

Warsh is seen as the most credible candidate of the three top candidates. MUFG commented; “Warsh is a strong advocate of Fed independence so fears over independence being eroded should recede which is also dollar supportive.

Scotiabank still sees the risk of net outflows from the US; “Regardless of whether the US is adopting a “hands off” approach to the weakening USD or not, investors demand for alternatives and havens is likely to remain strong, strengthening the early year trend that has seen precious metals surge and EM FX/equities outperform the USD and US assets.”

Credit Agricole played down the threat of a dollar devaluation policy; “market fears about a Mar-a-Lago accord to cheapen the USD seem overblown. First, the US concluded many trade deals in 2025 and none explicitly referenced the USD exchange rate and/or pushed for the appreciation of the currencies of its trading partners vs the USD.”

It added; “Second, the US further secured investment commitments from its trading partners

that would help boost the outlook for the US industrial base. In turn, this could obviate the need for a weaker USD to boost the US international competitiveness.”

Markets do not expect a change in Bank of England rates this week.

As far as the Pound is concerned, BNP Paribas notes that the UK current account deficit is an on-going source of vulnerability.

It noted strong demand for UK bonds from overseas funds and added; “That demand seems to be persisting but it is contingent on the fiscal backdrop remaining credible.”

In this context, it noted risks surrounding the May local elections.

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TAGS: Pound Dollar Forecasts