Pound Sterling to Dollar Forecast: 1.33 Reclaimed but Upside Limited

Modified: Wednesday, 18 March 2026 13:16 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: 1.33 Reclaimed but Upside Limited

The Pound to Dollar exchange rate (GBP/USD) rebounded from three-month lows near 1.3230, climbing back above 1.3300 as the US dollar lost momentum amid a partial retreat in energy prices.

Despite the recovery, gains remain fragile with oil still elevated and markets braced for continued volatility, leaving Sterling vulnerable to renewed downside if geopolitical tensions escalate again.

GBP/USD Forecasts: Rebound from 3-Month Lows

The Pound to Dollar rate found support close to 1.3230 on Monday and rallied to just above the 1.3300 level as the dollar lost ground amid a retreat in energy prices.

GBP/USD edged higher to 1.3330 on Tuesday as the dollar failed to make headway despite a fresh net advance in oil prices. UK equities held firm which helped protect the Pound while there is still the threat of high volatility across all asset classes.

UoB still sees downward GBP/USD risks; “The rebound appears to be part of a short-covering and is unlikely to be sustained. Today, we expect GBP to range-trade, most likely between 1.3250 and 1.3350.”

ING sees limited medium-term downside moves for GBP/USD; “Assuming this energy shock does not last for a full three months or longer, we expect GBP/USD to find support in the low 1.30s.”

Energy prices will continue to be monitored very closely with the US attempting to garner support for opening the Straits of Hormuz while support from European and Asian countries has been lukewarm. Brent is trading just above the $100 p/b level.

ING commented on the outlook; “In our baseline, intensive combat ends within two weeks, but lower‑intensity strikes could continue for several months, delaying the reopening of the Strait of Hormuz, which would not return to full capacity before June. This means a $91/b average for Brent in 2Q and $85/b in 3Q, in our estimates.”

Barclays is now more cautious over the dollar; “A lot has been priced in reflected by the sharp shift in risk reversal skews and USD sentiment with the latter back near recent extremes. We think this poses risks of a reversal on signs of even a partial de-escalation and/or any oil price retracement.”

It added; "Given that a prolonged crisis benefits no one, the risk reward is starting to shift against the dollar.

Goldman Sachs, however, expects dollar strength to persist during the second quarter; “With the risk of non-linear increases in oil and gas prices in more extreme scenarios, we now forecast some of the Dollar’s recent strength to persist over the next 3 months.”

As far as the economy is concerned, the Federal Reserve will announce its interest rate decision on Wednesday with no change in rates expected.
According to Bank of America; "Wednesday's FOMC is unlikely to be a pivotal event for the USD in this environment,"

It added; "The overall messaging and tone from Chair Powell will likely underscore these increased uncertainties, while any revealed bias on the inflation or growth risks will likely be quickly digested by the FX market."

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TAGS: Pound Dollar Forecasts