Pound to Dollar Forecast: GBP/USD Tests Key Support

Modified: Monday, 2 March 2026 08:01 BST - Written by Ben Hughes

STORY LINK Pound to Dollar Forecast: GBP/USD Tests Key Support

The Pound to Dollar exchange rate (GBP/USD) is trading near key technical levels as investors balance shifting Bank of England rate expectations against a resilient US dollar backdrop.

With UK growth concerns and political uncertainty limiting Sterling upside, while firm US data and Federal Reserve policy restraint underpin the greenback, GBP/USD remains vulnerable to sharp moves if either side gains a clearer fundamental advantage.

GBP/USD Forecasts: Starmer on the brink?

Citi FX forecasts that the Pound to Dollar (GBP/USD) exchange rate will slide to 1.24 by the end of 2026. The bank maintains a negative stance on the Pound and also expects a dollar rebound in global markets.

Danske Bank is backing GBP/USD gains to 1.40 on a 12-month view amid dollar losses.

After bouncing back above 1.3500, GBP/USD was subjected to renewed selling after the Gorton by-election with a slide to near 1.3450.

Scotiabank commented on the short-term price action; “it does suggest that bears are firmly back in control and may drive an extension of the pullback from the late January multi-year high. We continue to highlight the importance of the 200 day MA (1.3447) and the 50 day MA (1.3542) as important levels of support and resistance, respectively. We would expect additional support at 1.34.”

There will be a UK budget update in the week ahead, although politics are likely to dominate.

The Pound drew some support from Bank of England comments during the week with Governor Bailey stating that the March rate decision was still open.

There were, however, fresh losses after the Green Party won the Gorton and Denton by-election with Reform second and Labour trailing third.

The result will put additional pressure on Prime Minister Starmer and speculation over a challenge is likely to build with markets fretting over the outlook for fiscal policy.

Citi noted political risks; “Second, term premium risks could re-emerge into Autumn 2026, if we see a more serious challenge to Labour Party leadership.”

The bank expects Bank of England policy will be a key element and is backing three cuts in rates to 3.0%.

According to the bank; “This is underpinned by disinflationary one-offs from the budget hitting the economy and a weak outlook for UK consumption and growth more broadly.”

HSBC sees Pound vulnerability on yield grounds; “GBP-USD looks rich relative to interest rate differentials, as expectations for a more dovish Bank of England (BoE) stance continue to grow. The GBP has remained under pressure since the narrow 5-4 BoE vote in February to maintain current policy. The key consideration for the GBP will be whether the BoE signals openness to further rate cuts during the remainder of 2026.”

Citi expects the dollar to make net gains as confidence strengthens with Federal Reserve policy a key element.

According to the bank; “A key element of our USD view is the Fed maintaining its independence and remaining data dependent. For us, the Kevin Warsh pick reinforces this view.”

Tariff policy will also be a key element following last week’s Supreme Court ruling that President Trump’s IEEPA tariffs were unconstitutional.

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TAGS: Pound Dollar Forecasts