Pound to Dollar Forecast: Can GBP Sustain 1.36 as Rate Bets Shift?

Modified: Monday, 4 May 2026 12:41 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: Can GBP Sustain 1.36 as Rate Bets Shift?

The Pound to Dollar exchange rate (GBP/USD) is holding just below 1.3600, after rebounding from support near 1.3450, as markets continue to navigate a mix of central bank caution and geopolitical uncertainty.

The Bank of England has adopted a wait-and-see stance on interest rates, helping to steady Sterling, while broader dollar moves and Middle East developments remain the dominant drivers for GBP/USD direction.

GBP/USD Forecasts: BoE wait and see

Credit Agricole is relatively bullish on the Pound, but still forecasts that the Pound to Dollar (GBP/USD) exchange rate will retreat to 1.31 by the end of 2026 as the dollar strengthens.

GBP/USD found support close to 1.3450 during the week and spiked to highs above 1.36 before settling just below this level with overall ranges still relatively contained.

Scotiabank sees scope for further near-term gains; “We note the absence of any material resistance ahead of the January high in the mid/upper-1.38s.

Middle East developments will remain key elements across all currencies. According to Credit Agricole; “The ebb and flow of geopolitical risks should remain an important driver of the GBP as well, and GBP/USD could continue to follow the broad USD moves across the board.

The Bank of England held interest rates at 3.75% at the latest meeting with an 8-1 vote as Pill voted for a rate hike. The bank noted the importance of Middle East developments and the high degree of uncertainty over energy prices and the economic implications.

It outlined three scenarios of differing severity for underlying inflation. Under the first two, the implications for interest rates would be limited, but the severe scenario would require multiple rate hikes.

Traders are pricing in three rate hikes this year whereas many investment banks expect only one hike.

Credit Agricole sees scope for a firm Pound even if rate expectations are scaled back; “We further note that the GBP remained firm even though UK rates investors have pared back somewhat their rate expectations in the wake of the policy meeting. Despite the latest correction lower, however, the GBP remains one of highest yielding G10 currencies and the currency could continue to draw support from its considerable rate appeal.

It added; “We conclude that it may take a more meaningful drop of the GBP’s relative rate appeal to see the currency suffer.”

Scotiabank notes that markets have not fully priced-in a June rate hike and commented;.”We thus see scope for further fundamental strength in the pound.”

It also considers that investors may be over-pessimistic surrounding the outlook; “Bearish sentiment offers the potential for further upside as markets shake off lingering concerns related to the US/Iran conflict as well as the political uncertainty that continues to plague PM Starmer.”

The bank also sees scope for dollar weakness; “The USD has already faded a good portion of the geopolitically-driven risk premium that was observed from early March, but the DXY continues to trade above its fair value and see scope for further weakness.”

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TAGS: Pound Dollar Forecasts