Pound to Dollar Forecast: Can GBP Recover After Burnham's By-Election Win?

Modified: Monday, 22 June 2026 08:31 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: Can GBP Recover After Burnham's By-Election Win?

The Pound to Dollar exchange rate (GBP/USD) remains under pressure after falling to two-month lows below 1.3200, as investors weighed a hawkish Federal Reserve against growing political uncertainty in the UK.

Andy Burnham's victory in the Makerfield by-election has intensified speculation over the future of Prime Minister Keir Starmer, adding a fresh source of uncertainty for Sterling at a time when markets are already questioning the outlook for UK interest rates.

GBP/USD Forecasts: New Prime Minister?

Standard Chartered expects the Pound to Dollar (GBP/USD) exchange rate to retreat to 1.30 on a 12-month view amid stronger US growth and a less dovish Federal Reserve policy.

ING, however, sees scope for a recovery to 1.36 by year-end as the Fed decides against rate hikes.

GBP/USD dipped sharply to 2-month lows below 1.32 before a limited recovery with contrasting views of the Federal Reserve and Bank of England (BoE) policy decisions a key element.

Andy Burnham’s victory in the Makerfield by-election also stoked expectations of a leadership challenge to Prime Minister Starmer. In this context, there were fresh reservations over fiscal policy and the UK bond market will be watched closely in the short term.

The BoE held interest rates at 3.75%, in line with consensus forecasts. There was a 7-2 vote for the decision with Pill and Greene voting for a rate hike.

Traders are still backing a rate hike by the end of this year, although investment banks are not convinced.

According to Standard Chartered; “BoE Monetary Policy Committee members have signalled rates are quite restrictive and do not need to go higher, pointing to further cuts ahead that would compress the UK-US rate differential and weigh on the GBP.”

Credit Agricole noted that markets are still pricing in a rate hike and added; “We thus continue to think that many BoE-related positives are already in the price of the GBP.”

The Federal Reserve held interest rates at 3.75%, but there was hawkish rhetoric from new Chair Warsh who stated that it was essential to return inflation to the 2% target.

MUFG commented; “We are not convinced though that a rate hike will be required, but acknowledge that there is a higher risk of rate hike in the second half of this year. It poses upside risks to our forecast for a weaker US dollar heading into next year.”

According to ING; “In an environment where many central banks are hiking interest rates, there’s a tendency to think that the Fed may not be far behind. We must remember, though, that the Fed has a different setup from the others.”

The Fed has a dual mandate targeting 2% inflation and maximum employment.

The bank added; “we suspect that the next forecast update, due in September, will see far fewer than nine FOMC members predicting a rate rise before year-end. To us, the most likely course of action is for the Fed to hold rates steady for a prolonged period, perhaps until the summer of next year.”

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TAGS: Pound Dollar Forecasts