GBP/USD Forecast: Pound Sterling Loses Momentum as Dollar Firms on US Data

Modified: Wednesday, 4 February 2026 20:31 BST - Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Sterling Loses Momentum as Dollar Firms on US Data

The Pound to US Dollar exchange rate (GBP/USD) drifted lower on Wednesday, easing back as investors digested a fresh batch of US economic data that lent modest support to the Dollar.

At the time of writing, GBP/USD was trading close to $1.3663, down around 0.2% from the start of the European session.

The US Dollar found some footing after the latest ISM services PMI signalled continued resilience in the US economy. January’s index held steady at 53.8, outperforming expectations for a slight dip to 53.5 and reinforcing the view that the services sector remains a source of strength.

Although the data lacked the punch of recent manufacturing releases, it was sufficient to underpin the Dollar and offset weaker labour market signals from the ADP employment report.

With the official non-farm payrolls release postponed due to the partial government shutdown, markets paid closer attention to the ADP figures, which showed job creation slowed sharply last month. Employment growth eased from 37,000 to just 22,000, highlighting a cooling trend in hiring.

The Pound, meanwhile, struggled to gain traction following the release of the UK’s final services PMI for January.

The index was revised down to 54 from an initial estimate of 54.3. While still marking the fastest pace of expansion since August 2025, the downgrade disappointed hopes of a fresh multi-month high and limited Sterling demand.

The survey also flagged ongoing weakness in employment, with service-sector firms continuing to scale back hiring. An increasing focus on automation and efficiency is weighing on job creation, tempering the otherwise upbeat headline reading.

GBP/USD Forecast: Bank of England Signals in Focus

Looking ahead, near-term direction in the Pound to US Dollar exchange rate is likely to hinge on the Bank of England’s first policy decision of 2026.

While no change in interest rates is expected, traders will scrutinise the BoE’s guidance for clues on how policymakers assess the outlook for inflation and growth. Any shift towards a firmer or more cautious tone could help Sterling stabilise as markets reassess expectations for future rate cuts.

For the US Dollar, attention will turn to the University of Michigan’s latest consumer sentiment survey. A further dip in confidence could erode some of the Dollar’s recent support if household morale continues to weaken.

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TAGS: Pound Dollar Forecasts