Pound to Dollar Week Ahead Forecast: Yield Spike Fails to Sustain GBP Rally

Modified: Monday, 23 March 2026 08:01 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Week Ahead Forecast: Yield Spike Fails to Sustain GBP Rally

The Pound to Dollar exchange rate (GBP/USD) fell back toward 1.3300 after a sharp post-BoE rally, as a surge in UK bond yields and renewed energy price shocks triggered a fresh bout of Sterling volatility.

While higher yields initially supported the Pound, a sharp sell-off in gilts and deteriorating risk sentiment have raised concerns that tightening financial conditions could weigh heavily on the UK economy and limit GBP/USD upside.

GBP/USD Forecasts: Bonds collapse

Standard Chartered has a 12-month Pound to Dollar (GBP/USD) exchange rate forecast of 1.30.

JP Morgan has cut its June 2026 GBP/USD forecast to 1.34 from 1.41 previously.

According to JP Morgan; “The closure of the Strait of Hormuz led us to turn neutral on the dollar for the first time in a year and we are now shifting to a tactically bullish view on the dollar.”

GBP/USD rallied strongly to highs near 1.3450 after the Bank of England policy decision, but there was a slide to 1.3300 on Friday amid a collapse in UK bonds.

Energy prices and central bank policy decisions dominated during the week with volatile trading conditions.

There was a surge in UK yields and a further big shift in expectations surrounding interest rates with traders pricing in at least two rate hikes this year and a high risk of three hikes.

The 2-year yield jumped to 4.60% from 3.50% at the end of February while the 10-year yield hit a 16-year high near 5.00%

Energy prices surged again following attacks on Middle East gas infrastructure and the dollar still generated defensive demand amid vulnerable risk conditions and weaker equity markets.

On the UK, Standard Chartered noted; “The recent spike in energy prices has revived a familiar dilemma for the BoE – tackle inflation or support softer demand.”

The combination of higher energy prices and yields will have a major negative impact on the economy.

According to MUFG; “The pound is deriving support from the surge in yields (although less support than usual for such a scale of rates move) and that will likely give way if broader risk conditions worsen.”

The Bank of England (BoE) held interest rates at 3.75%, in line with consensus forecasts.

There was a 9-0 vote for unchanged rates compared with expectations that two members would continue to back rate cuts. The central bank also warned that it was watching the impact of energy prices closely amid concerns over the risk of second-round impacts on inflation.

ING commented; “The Bank of England's unquestionably hawkish decision to hold rates has opened the door to future hikes if energy prices stay elevated.”

It added; “Yet we'd be careful in drawing clear signals from today's move, which also floated the possibility of faster rate cuts. Under ING's base case energy scenario, we think the most likely path forward is a prolonged pause.”

The Federal Reserve held interest rates at 3.75% at the latest policy meeting, in line with consensus forecasts.

Chair Powell emphasised that there was a high degree of uncertainty over the outlook.

The interest rate forecasts from individual committee members continued to have a mean projection of one cut for this year.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts