Pound Sterling to Dollar Forecast: GBP/USD Rebounds from 6-Week Lows

Modified: Tuesday, 19 May 2026 15:11 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Rebounds from 6-Week Lows

The Pound to Dollar exchange rate (GBP/USD) recovered from fresh 6-week lows near 1.3300 as a retreat in UK bond yields and a softer US dollar helped Sterling stabilise after heavy recent losses.

Markets remain highly sensitive to global bond market volatility, inflation fears and ongoing political uncertainty in the UK, while developments surrounding Iran and Federal Reserve policy continue to dominate broader currency sentiment.

GBP/USD Forecasts: Recovers from 6-Week Lows

The Pound to Dollar (GBP/USD) exchange rate posted further losses to 6-week lows close to 1.3300 before a rebound to 1.3370.

After initial gains, the dollar failed to hold best levels with markets focussed firmly on global bond markets, central bank policies and inflation fears.

The FTSE 100 index recovered from 6-week lows while the 10-year bond yield also retreated from fresh 18-year highs just above 5.20% to trade around 5.10%.

The Pound drew some support from the latest IMF update which raised the 2026 UK GDP growth forecast to 1.0% from 0.8% previously.

There are still doubts whether the Pound can secure sustained relief. According to UoB; “should GBP break and hold below 1.3300, the next support of note is some distance away, at 1.3325. On the upside, the ‘strong resistance’ level is now at 1.3410 instead of 1.3500.”

Domestically, political uncertainty will be a key element with an assumption that Greater Manchester Mayor Burnham will secure the Labour Party nomination for the Makerfield by-election with the vote due on June 18th.

Oil prices initially moved higher on Monday with no resolution to the Iran crisis, although prices dipped later in the session after reports that Iran could secure a temporary waiver on oil sanctions.

MUFG noted medium-term risks; “The lack of progress in peace talks between the US and Iran to end the conflict and to re-open the Strait of Hormuz leaves the door open for a more disruptive stagflationary outcome for the global economy and financial markets.

A key element will be whether the dollar will gain net support.

According to Barclays; "It appears conditions for risk and bonds are deteriorating and conditions for the dollar rally to extend this week are ripe."
Commerzbank strategist Michael Pfister considers that the US interest rate debate will be crucial in the short term; "Although expectations regarding the Fed had shifted significantly towards a more restrictive monetary policy from the outset, market participants were still reluctant to bet on interest rate hikes. This changed last week, with expectations regarding the Fed shifting most markedly among the G10."

ING downplayed the impact of this week’s data releases; “we're more interested in Fed speakers, though, with Christopher Waller due to speak tomorrow and deliver a speech on the economic outlook on Friday.”

According to the bank; “His most recent speeches seem to have pushed for a prolonged pause in monetary policy, but any shift towards the need for a hike would be dramatic. Were that to be seen, the yield curve would flatten, and the dollar would probably rally further.”

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TAGS: Pound Dollar Forecasts