Pound Sterling to Dollar Forecast: Fed Rate Speculation Keeps GBP Below 1.35

Modified: Wednesday, 3 June 2026 17:21 BST - Written by James Fuller

STORY LINK Pound Sterling to Dollar Forecast: Fed Rate Speculation Keeps GBP Below 1.35

The Pound to Dollar exchange rate (GBP/USD) remained capped below the 1.3500 level as investors balanced resilient UK fundamentals against growing expectations that the Federal Reserve may need to maintain a tighter policy stance for longer. While Sterling has continued to find support above 1.3400, a run of firmer US economic data and renewed speculation over future Fed action have helped keep the Dollar underpinned.

GBP/USD Forecasts: Held Below 1.35

The Pound to Dollar (GBP/USD) exchange rate found support above 1.3400 on Monday and has secured a net recovery to around 1.3475 before stalling.

The dollar has held a firm tone without gaining any significant traction while the Pound has remained resilient in global markets.

According to UoB; “Downward momentum has faded, and the current price movements are likely part of a range-trading phase between 1.3390 and 1.3510.”

Barclays Bank maintains a cautious stance surrounding the Pound on political grounds and commented; “The Makerfield by-election on 18 June remains a key signpost that is likely to re-ignite the discussion around fiscal policy risks were Burnham to return to Westminster and challenge for the Labour Party leadership.”

The dollar gained some ground on Monday as risk appetite deteriorated following reports that Iran had stopped negotiating with the US as a protest over the situation in Lebanon. The tone is slightly more positive on Tuesday with a lack of volatility.

ING commented; “The FX market looks just as reluctant to price in a re-escalation in the Middle East this morning as it was to price in an imminent peace deal in recent days.”

Scotiabank commented; “Market sentiment took a meaningful tumble on Monday as Iran announced the cessation of negotiations with the US, in protest over Israel, and left markets trading defensively for much of the day. The latest reports from Iranian state media suggest ongoing deliberation over the agreement’s text, as negotiations continue.”

As far as US data is concerned, the latest JOLTS data recorded a sharp increase in job openings to 7.62mn for April from a revised 6.89mn previously and well above consensus forecasts of 6.86mn.

In contrast, there was no improvement in consumer confidence with the IBD index at 42.5 for June from 42.6 the previous month and below expectations of 44.5.

US bonds edged lower with the 10-year yield just above 4.45%.

Paul Mackel, global head of forex research at HSBC commented; "The combination of loose U.S. financial conditions, reversing safe-haven support and the Fed sounding patient has kept the dollar in check."

Nevertheless, he does see scope for a shift in mood; "However, a turning point is nearing, as much will increasingly depend on key economic data and what central banks say and do next, in particular the Federal Reserve."

The run of firm data from the US will increase speculation that the Fed will adopt a more hawkish policy stance and potentially consider a rate hike.

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TAGS: Pound Dollar Forecasts