Pound to Dollar Week Ahead Forecast: Political Transition Keeps Pressure on GBP

Modified: Monday, 29 June 2026 07:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: Political Transition Keeps Pressure on GBP

The Pound to Dollar exchange rate (GBP/USD) remains under pressure after falling to seven-month lows below 1.3150, with investors increasingly focused on the UK's political transition and the outlook for US interest rates.

While Sterling has recovered above 1.3200, markets are now looking ahead to Andy Burnham's expected cabinet appointments, particularly the choice of Chancellor, as a key test of confidence in UK fiscal policy.

GBP/USD Forecasts: New Chancellor Expected

HSBC expects the Pound to Dollar (GBP/USD) exchange rate to retreat and a move below 1.30 would be justified by interest rate spreads.

According to HSBC; “GBP/USD has spent long stretches this year going nowhere fast, but the next month looks different. We think the pair is likely to move lower, and the reason is simple. The forces that typically support GBP are fading while the headwinds are getting louder.”

Scotiabank is also cautious over the Pound, but expects dollar weakness will allow GBP/USD gains to 1.37 by the end of this year.

GBP/USD dipped sharply to 7-month lows below 1.3150 during the week before recovering the 1.32 level.

Following the resignation of Prime Minister Starmer, there are strong expectations that Burnham will become the new Labour leader and become the next Prime Minister.

If Burnham wins, the immediate focus will be on his cabinet appointments. There are strong expectations that Reeves will not remain in post and the new appointment will be watched closely. Markets will be watching the policy implications very closely.

Scotiabank emphasised underlying risks; “Fiscal risk remains a core concern for markets as participants look specifically to the choice of Chancellor. Burnham is a left-leaning candidate and markets may struggle to remain confident in the UK’s fiscal outlook without a clear re-commitment to the self-imposed fiscal rules championed by current Chancellor Reeves.”

The outlook for US interest rates will also be a key element.

According to Credit Agricole; “In the absence of any significant surprises on the domestic front, the GBP could continue to closely follow global developments like the path of the USD and US rates as well as the resilience of market risk sentiment.”

HSBC expects a hawkish Fed narrative will support the dollar in the short term.

Credit Agricole also sees scope for further dollar gains due to vulnerable risk conditions and expectations of higher bond yields.

Scotiabank, however, is still backing a Fed rate cut by the end of this year and added; “Narrowing interest rate differentials have been a critical driver of the broad weakening in the USD from its 2022 peak, and we expect this trend to continue into the end of our forecast horizon.”

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TAGS: Pound Dollar Forecasts