British Pound to Dollar Forecast: GBP Tests Highs Amid USD Weakness

Modified: Monday, 20 April 2026 08:01 BST - Written by Ben Hughes

STORY LINK British Pound to Dollar Forecast: GBP Tests Highs Amid USD Weakness

The Pound to Dollar exchange rate (GBP/USD) has rallied to 8-week highs near 1.3600, supported by easing energy concerns and growing optimism over Middle East developments.

However, with markets already pricing in much of the positive news and UK growth concerns persisting, attention is turning to whether renewed dollar vulnerability can drive further gains or if GBP/USD will struggle to extend beyond the 1.36–1.37 zone.

GBP/USD Forecasts: Dollar more vulnerable?

Danske Bank forecasts limited Pound to Dollar (GBP/USD) exchange rate gains to 1.37 on a 12-month view with the Pound and dollar both struggling in global markets.

RBC Capital Markets sees a stronger GBP/USD advance to 1.40.

GBP/USD rallied strongly to 8-week highs near 1.36 after Iran agreed to open the Strait of Hormuz while the ceasefire was in place with markets also optimistic that the ceasefire would be extended.

Danske Bank remains cautious; “While markets increasingly are priced for an improvement to the flow of energy in the Persian Gulf the risk of a renewed escalation remains high.”

The UK recorded GDP growth of 0.5% for February compared with consensus forecasts of 0.1%.

ING cast doubt on the data; “We're taking this latest data with a pinch of salt.”

Danske added; “With higher fuel prices at the pump and limited room to cushion the blow for consumers, the already modest growth outlook is now being squeezed even further.”

The IMF and OECD both now expect 2026 GDP growth will be below 1.0% this year.

ING added; “This is why we’re still not convinced the Bank of England will hike rates this year. It’s a close call, which becomes closer still if the disruption hasn’t materially improved by the time of the June meeting. But for now, we’re looking for rates to stay unchanged at 3.75% throughout 2026.”

There was renewed pressure on Prime Minister Starmer after another scandal surrounding the appointment of Mandelson as UK ambassador to the US.

The bond market will be watched closely, especially as fiscal difficulties will be amplified by weaker growth.

MUFG noted additional risks surrounding the May 7th local elections; “If political risks intensify we could certainly see this translate to pound underperformance over the coming weeks.”

RBC still expects net dollar losses; “Our medium-term view for USD weakness is unchanged. The key driver of this is the cost-of-hedging argument. Our US rates strategy team sees the Fed on hold this year and then making three 25bp rate cut adjustments to take rates to neutral in 2027.”

It added; “With all else equal, this would translate into cheaper USD hedging costs and subsequently result in higher equity and rates hedge ratios for foreign investors.”

According to MUFG; “Fed independence uncertainties and Trump’s overt interference and general US dollar debasement fears will likely return to focus, and weigh on the US dollar.”

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TAGS: Pound Dollar Forecasts