Pound to Dollar Forecast: GBP Tests 10-Day Lows Before Stabilising

Modified: Wednesday, 18 February 2026 09:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Tests 10-Day Lows Before Stabilising

The Pound to Dollar exchange rate (GBP/USD) rebounded toward 1.3600 after briefly sliding to 10-day lows near 1.3550, as softer UK labour market data intensified expectations of a March Bank of England rate cut.

Sterling initially came under pressure after unemployment rose to a five-year high and wage growth slowed sharply, but a firmer tone in UK equities and a steadier dollar helped limit losses.

While markets are now pricing a clearer path toward BoE easing, parallel expectations of Federal Reserve rate cuts are containing broader GBP/USD downside - leaving the pair trapped between weakening domestic fundamentals and a dollar lacking strong conviction.

GBP/USD Forecasts: Recovery from 10-Day Lows

The Pound to Dollar (GBP/USD) exchange rate dipped sharply to 10-day lows close to 1.3550 after the latest UK jobs data before rallying to near 1.3600 as the dollar was unable to hold its best levels with gains in the FTSE 100 index helping to underpin the Pound.

Markets expect further Bank of England and Federal Reserve rate cuts over the next few months, limiting potential GBP/USD moves.

Standard Chartered has a 12-month GBP/USD forecast of 1.35 with weak domestic growth hampering the Pound against a fragile dollar.

Markets are pricing in more aggressive Bank of England easing, potentially hurting the Pound, although a rally in gilts and a decline in bond yields will curb fiscal fears to some extent. According to Scotiabank; “the options market is showing signs of stabilization.”

The UK unemployment rate increased to a 5-year high of 5.2% in the three months to December from 5.1% previously. There was a further reduction in payrolls for December and an estimated retreat of 11,000 for January. There was, however, further evidence that the level of vacancies has stabilised.

Wages growth was a notable talking point with a slowdown in annual growth to 4.2% from 4.6% previously. Private-sector wage growth also slowed to 3.4%.

ING commented; “We expect that to drop to 3% by the summer, despite a slight pick-up in the three-month annualised growth rate in the most recent data. By the Bank of England’s own admission, that would be below the rate of pay growth that's consistent with a 2% target.

The bank remains confident that the BoE will cut rates in March and expects a further cut in June.

According to Thomas Pugh, chief economist at RSM UK; “December’s rising unemployment rate, slowing private wage growth and falling payroll numbers in January all point towards a rate cut in March. A soft inflation number tomorrow is all it will take to seal the deal.”

He added: “Overall, today’s data suggests the labour market was still weak at the end of last year.

The UK inflation data will be released on Wednesday with consensus forecasts for the annual rate to decline to 3.0% from 3.4% with a retreat in the core rate to 3.1% from 3.2%.

The dollar is relatively calm in global markets, although markets are still wary over underlying fundamentals and the potential for further interest rate cuts.

Danske Bank commented; “Political noise from the Trump administration has eased ahead of the midterms: Warsh’s Fed chair nomination has calmed independence fears, immigration policy rhetoric has eased, and tariff threats have diminished. At the same time, monetary policy divergence has emerged as a key theme.”

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TAGS: Pound Dollar Forecasts