Pound Sterling to Dollar Forecast: GBP Above 1.35 on US Trade Chaos

Published: Wednesday, 25 February 2026 09:00 BST - Written by Tim Boyer

STORY LINK Pound Sterling to Dollar Forecast: GBP Above 1.35 on US Trade Chaos

The Pound to Dollar exchange rate (GBP/USD) is trading just below the 1.3500 mark, held up by renewed US trade policy uncertainty after a Supreme Court ruling struck down key tariff measures, even as broader market caution persists amid mixed economic signals.

Soft US dollar sentiment following the State of the Union address and ongoing tariff confusion have limited further downside, but GBP/USD remains vulnerable until clarity emerges on US trade direction and UK political risks.

GBP/USD Forecasts: Held Just Below 1.35

The Pound to Dollar (GBP/USD) exchange rate is trading just below 1.3500 after failing to hold above this level. Politics and economics will remain crucial elements this week.

Trade uncertainty remains a key element, discouraging aggressive position taking, but there has been relief that global equity markets have been broadly resilient. If equity markets stumble, the Pound will be much more vulnerable in global markets.

According to UoB; “GBP is likely to trade sideways today, probably between 1.3465 and 1.3525.” GBP/USD needs to break above 1.3550 area to secure a stronger base.

There will inevitably be major political drama after the US close with President Trump’s State of the Union Address with trade policy likely to dominate unless there is a US military strike on Iran.

Sterling traders will also be cautious ahead of Thursday’s UK Gorton and Denton by-election.

There was further uncertainty on Tuesday as the new global tariff to replace the IEEPA tariffs was published at 10% compared with President TRump’s assertion that the rate would be 15%.

ING analyst Carsten Brzeski commented; “I think it simply adds to the chaos and mess. "In terms of uncertainty we're back to where we were last year."

National Australia Bank, head of currency strategy Ray Attrill added;. "It's just the uncertainty about what the future trade landscape will look like, just at a point where most countries had signed or were on the cusp of signing trade deals.”

Markets will, therefore, be looking for clarity on the issue of tariffs, especially given uncertainty over the implications for trade deals already agreed in principle. There will be fears of retaliation by major global trade partners while Trump has warned over further action if countries renege on deals..

ING’s Brzeski added; “"The risk of a real fully-fledged tariff war - trade war - escalation is clearly higher than last year."

The outlook for interest rates will also remain a key element for currency rates.

At this stage, markets are pricing in close to an 80% chance of a Bank of England rate cut at the March meeting, but less than a 5% chance of a Federal Reserve move.

GBP/USD will secure net support if this balance shifts in the Pound’s favour.

Comments from Bank of England members in testimony to the Treasury Select Committee as well as Fed officials will be watched closely.

Overnight, Fed Governor Waller suggested unchanged rates in March would be appropriate if the labour-market data was more favourable.

He did, however, add; “if the good labour market news of January is revised away or evaporates, it would in February, it would support my position at the FOMC’s last meeting, that a 25 basis point reduction in the policy rate is appropriate, and that such a cut should be made at the March meeting.”

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TAGS: Pound Dollar Forecasts