GBP/USD Forecast: Pound Sterling Weakens after BoE Policy Shift

Modified: Thursday, 5 February 2026 20:31 BST - Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Weakens after BoE Policy Shift

The Pound to US Dollar exchange rate (GBP/USD) sold off sharply on Thursday as markets digested the Bank of England’s latest policy decision, which was viewed as more dovish than expected.

At the time of writing, GBP/USD was trading near $1.3570, marking a decline of around 0.6% from the start of the day’s session.

Sterling came under sustained pressure after the Bank of England left interest rates unchanged at its first meeting of 2026, but with a narrower vote split than markets had anticipated.

Rather than the widely expected 7–2 decision in favour of holding rates, the Monetary Policy Committee delivered a 5–4 vote, signalling a growing divide within the committee and a stronger appetite for looser policy.

The unexpectedly tight outcome reinforced expectations that interest rate cuts could arrive sooner rather than later. Markets moved to price in as much as 50 basis points of easing this year, with some traders now seeing scope for the first cut as early as March, dragging the Pound lower.

The US Dollar, meanwhile, found some support through Thursday’s European session, benefiting from safe-haven demand amid choppy market conditions.

However, the Greenback’s gains were capped following the release of the latest US jobless claims figures. Initial claims for unemployment benefits rose to 231,000 last week, up from 209,000 previously.

The increase prompted investors to reassess the resilience of the US labour market, unwinding part of the recent hawkish repricing of Federal Reserve rate expectations and limiting further USD upside.

GBP/USD Forecast: Will Softer US Confidence Weigh on the Dollar?

Looking ahead, attention turns to the University of Michigan’s consumer sentiment survey, which could provide the next directional cue for the Pound to US Dollar exchange rate.

A further deterioration in household confidence may revive concerns over the durability of US economic momentum, potentially weighing on the Dollar.

On the UK side, the economic calendar remains sparse. In the absence of fresh data, Sterling may remain sensitive to domestic political developments, with questions continuing to swirl within the Labour Party over Prime Minister Keir Starmer’s leadership following the Mandelson–Epstein controversy.

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TAGS: Pound Dollar Forecasts