GBP/USD Forecast: Weak UK Growth Weighs on Pound Sterling

Modified: Tuesday, 24 March 2026 20:46 BST - Written by Frank Davies

STORY LINK GBP/USD Forecast: Weak UK Growth Weighs on Pound Sterling

The Pound to US Dollar (GBP/USD) exchange rate softened on Tuesday following the release of downbeat UK business activity data.

At the time of writing, GBP/USD was trading near $1.3401, down approximately 0.2% from the day’s opening levels.

The Pound slipped as investors reacted to the UK’s latest flash PMI readings, which pointed to a notable slowdown in private sector growth.

Figures from S&P Global indicated that although output continued to rise, the pace of expansion eased significantly, with the composite index dropping from 53.7 to 51, its weakest reading since September.

The data underscored the growing strain on UK businesses as the Middle East conflict feeds through to the domestic economy. Rising energy costs have pushed up operating expenses, while softer demand has weighed on overall activity.

This combination presents a difficult challenge for the Bank of England, which must contend with mounting inflationary pressures without further undermining economic growth.

The US Dollar strengthened, with renewed geopolitical uncertainty boosting demand for the safe-haven currency.

Market nerves were rattled after Iranian officials pushed back against claims from US President Donald Trump that recent discussions between the two nations had been constructive.

Warnings that disruptions to shipping through the Strait of Hormuz could persist for months also unsettled investors.

These concerns helped underpin the US Dollar as investors sought shelter from the uncertainty.

Short-Term GBP/USD Forecast: UK Inflation Data in Focus

The next key driver for the Pound to US Dollar exchange rate is likely to be the release of the UK’s latest inflation figures.

While the data may already feel somewhat outdated given the recent surge in energy prices, a reading that remains well above the Bank of England’s 2% target could reinforce expectations that policymakers may need to maintain a more hawkish stance and potentially offer some support to Sterling.

With little in the way of US data scheduled, the direction of the US Dollar is likely to remain closely tied to developments in the Middle East, where ongoing uncertainty continues to favour safe-haven demand.

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TAGS: Pound Dollar Forecasts