Pound Sterling to Dollar Forecast: Can GBP Sustain Gains Above 1.36?

Modified: Wednesday, 6 May 2026 14:36 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: Can GBP Sustain Gains Above 1.36?

The Pound to Dollar exchange rate (GBP/USD) has pushed above 1.3600 as markets weigh persistent geopolitical risks against growing political uncertainty in the UK.

Sterling continues to draw support from elevated UK yield expectations, but investors remain cautious ahead of this week’s local elections and key US economic data, with Middle East tensions and energy prices still dominating broader market sentiment.

GBP/USD Forecasts: Holds Above 1.3500

The Pound to Dollar (GBP/USD) exchange rate has held above 1.3500, but struggled to make much headway and traded close to 1.3550.

According to Scotiabank; “We see support around 1.3450 and look to a near-term range bound between 1.3500 and 1.3600.”

The dollar drew support from fresh concerns surrounding the Middle East situation with the Strait of Hormuz still effectively closed.

ING commented; “Unless there are clear signs of moves towards sustainable peace in the Gulf – and there is some focus that President Trump wants a deal before his trip to China on 14/15 May – we suspect high oil prices can keep short-dated US rates and the dollar bid.”

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Domestically, the Pound is liable to face headwinds from political uncertainty which will be offset by support from high yields. Local elections, together with Welsh and Scottish assembly votes will be held on May 7th.

Rabobank head of FX strategy Jane Foley commented; "The biggest story for sterling since the start of this war has been the change in money market pricing of Bank of England interest rate hikes."

Scotiabank; “The outlook for relative central bank policy is bullish for GBP as market participants consider the hawkish guidance and last week’s tightening vote from uber-hawkish Chief Economist Pill.”

The bank noted political risks; “The greatest near-term risk lies with Thursday’s local elections, seen as the latest litmus test for PM Starmer’s leadership.”

Nevertheless, it sees asymmetric risks; “Relief for Starmer (and markets) could fuel near-term strength for the pound, while disappointment would offer little to market participants already positioned for a negative outcome.”

US monetary policy will also be a potentially important influence on currencies.

The latest US jobs data will be released this week with markets also monitoring inflation pressures amid the surge in oil prices. Inflation pressures will create pressure for a tiger policy.

According to ING, the dollar could draw some support; “It’s no longer just a question of delayed Fed easing, but whether the Fed will respond to this inflation shock after all with tighter policy.”

It expects jobs data will be important this week.

MUFG is less convinced that the dollar can make headway; “The relatively dovish leadership of the Fed continues to encourage expectations that it will look through the energy price shock while European central banks are more likely to tighten policy creating a headwind for US dollar performance.”

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TAGS: Pound Dollar Forecasts