Pound to Dollar Week Ahead Forecast: 1.30 Risk Before 1.37 Recovery?

Modified: Monday, 9 March 2026 08:01 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Week Ahead Forecast: 1.30 Risk Before 1.37 Recovery?

The Pound to Dollar exchange rate (GBP/USD) remains volatile as markets reassess the outlook for both Bank of England and Federal Reserve policy amid surging energy prices and heightened geopolitical risks.

Sterling briefly slid to three-month lows near 1.3250 during the latest bout of risk aversion before recovering toward 1.3350, as traders weigh whether central banks will delay or accelerate interest-rate cuts in response to the inflationary impact of higher oil and gas prices.

GBP/USD Forecasts: BoE and Fed test

MUFG expects the Pound to Dollar (GBP/USD) exchange rate to dip towards 1.30 in the short term before a rebound to 1.37 by the end of 2026.

UBS expects GBP/USD gains to 1.40 by early next year with both banks expecting dollar gains to reverse.

Developments surrounding the Middle East have dominated during the week. There has been volatility in risk appetite while the main feature has been a spike in energy prices.

The Pound was broadly resilient in global markets, but GBP/USD dipped sharply to 3-month lows near 1.3250 amid dollar gains and a slide in equities before a recovery to 1.3350.

There has been a shift in expectations surrounding Bank of England (BoE) policy with markets expecting that the BoE will decide against a March rate cut given elevated uncertainty and the jump in energy prices.

UBS does expect the Pound will struggle in the near term; “With local and regional elections in May and monetary easing likely to continue through to June, the GBP is unlikely to outperform. On the other side, the USD should benefit from a robust cyclical outlook, with rising growth expectations and stabilizing labor market data.”

The bank does not, however, expect sustained dollar strength; “the USD’s strength is tempered by ongoing domestic political uncertainty and ambiguity around US trade policy. The recent geopolitical risks around the US-Iran war have clearly been USD supportive, but are likely to be temporary.”

It added; “The USD, while supported by stronger near-term economic data, continues to face headwinds from persistent political uncertainty and investors' still-high global allocations in US assets as they look to diversify. As UK-specific risks fade, GBPUSD should trend higher.”

Rabobank discussed the outlook for US rates; “Under Chair Powell, the Fed will likely stick to a wait-and-see approach – similar to its stance during the tariff-driven shock. This means the Fed needs to see more data. This makes a rate cut in March or April highly unlikely.”

It added; “However, if Warsh becomes the next Chair, we could see a different approach. He does not see much use for data dependence and near-term forecasting. Although he may face considerable pushback, Warsh could try to break the FOMC’s indecision and push for rate cuts at his first meeting in June, arguing that the Committee should look through the temporary effects of energy prices on inflation.”

MUFG commented; “We have not made any major changes to our rates path and continue to
expect 3 Fed cuts (only the timing is up for debate). We believe the consensus view is too optimistic on growth and that jobs data is going to get continually revised lower (along with inflation).”

The bank expects two BoE rate cuts this year.

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TAGS: Pound Dollar Forecasts