Pound to Dollar Forecast for This Week: Rising Yields Hold the Key for GBP/USD

Modified: Monday, 1 June 2026 07:31 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast for This Week: Rising Yields Hold the Key for GBP/USD

The Pound to Dollar exchange rate (GBP/USD) remained on the defensive as investors focused on rising US bond yields, persistent inflation concerns and political uncertainty in the UK.

While Sterling found support below the 1.3400 level, markets continue to assess whether higher US yields and a potentially more hawkish Federal Reserve will keep the Dollar in demand through the summer.

GBP/USD Forecasts: Yields pivotal

UBS is positive on the Pound and has a 12-month Pound to Dollar (GBP/USD) exchange rate forecast of 1.40.

Standard Chartered, however, considers that there is a bearish bias for the currency and expects GBP/USD to weaken on a 12-month view.

GBP/USD edged lower during the week amid a firm dollar tone, but found support below the 1.3400 level.

Politics will inevitably be a key focus during June with the Makerfield by-election on June 18th and potential formal challenge on Prime Minister Starmer.

MUFG commented; “Based on the preferences of Labour Party members, a soft-left candidate such as Andy Burnham, Angela Rayner, or Ed Miliband is favoured to become the next leader, implying a potential shift to the left in policymaking. Andy Burnham’s commitment to the self-imposed fiscal rules has helped curtail Gilt market selling but if Burnham wins Makerfield and then becomes prime minister, there will no doubt be episodes when bond investors question his commitment to fiscal stability.”

UBS remains positive on the Pound; “While GBP/USD could remain suppressed in the near term due to UK political noise and elevated oil prices, we expect a recovery throughout the year due to several factors: We expect the Iran conflict to be resolved eventually, leading to lower oil prices that support the Pound; UK political uncertainty is likely to fade in coming months.

It added; “the pound is supported by robust UK data and a high yield with an upward bias while the USD is capped.”

Looking at the US outlook, UBS commented; “Political uncertainty is likely to shift from the UK to the US in 3Q-4Q ahead of mid-term elections in November.”

Standard Chartered is negative on the Pound fundamentals; “GBP/USD rangebound with bearish bias: The UK economy faces persistent stagflation pressures and a weakening labour market. While the BoE remains attentive to inflation, we anticipate that a deteriorating growth outlook will eventually force a more dovish pivot than currently priced.

It added; “Furthermore, the UK’s structural vulnerabilities, including limited fiscal flexibility and heightened political uncertainty bring further downside risk.”

MUFG is also positive on the dollar outlook; “US yields look set to continue to provide support for the dollar with Fed officials more aligned with focusing on inflation risks. Fed Governor Waller’s speech last week underlined the shift with a signal of a potential rate hike if “inflation does not abate soon”.

ING commented on upward pressure on US yields; “The market briefly priced one full 25bp Fed hike last Friday on his comments that the longer oil prices stay this high, the greater the risk of inflation expectations becoming unanchored and the Fed needing to hike. That briefly triggered some bearish flattening of the US yield curve – a clear dollar positive.

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TAGS: Pound Dollar Forecasts