Pound to Dollar Forecast: GBP Tests 1.34 as Mixed US Economic Data Clouds Fed Outlook

Modified: Thursday, 16 July 2026 17:36 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: GBP Tests 1.34 as Mixed US Economic Data Clouds Fed Outlook

The Pound to Dollar exchange rate (GBP/USD) rebounded towards the 1.3400 level after a mixed batch of US economic data failed to extend the US Dollar's recent gains.

Headline US retail sales rose 0.2% in June, matching expectations, while the closely watched control group increased a stronger-than-expected 0.5%, pointing to resilient underlying consumer demand. However, core retail sales excluding autos unexpectedly fell 0.2%, tempering enthusiasm for the Dollar despite a further decline in weekly jobless claims that reinforced the strength of the US labour market.

Investors continue to weigh evidence of resilient US economic activity against signs that consumer spending is becoming more selective, while expectations for Federal Reserve policy and developments in the Middle East remain key drivers of Dollar sentiment.

GBP/USD Forecasts: Unable to Make Headway

The Pound to Dollar (GBP/USD) exchange rate has continued to trade around 1.3400 and is currently trading just below this level with no attempt to break key resistance.

Scotiabank noted; “the GBP’s recovery from its June 24 low (~1.3150) looks to have stalled over the past week or so, with apparent resistance above 1.3400.”

It added; “We see dense resistance ahead of 1.3500, and we look to a near-term range bound between 1.3350 and 1.3450.”

ING has a 3-month GBP/USD target of 1.31 as the dollar makes headway.

Following today's retail sales report, markets remain divided over whether resilient consumer demand will be enough to keep the Federal Reserve on a hawkish path, particularly after softer CPI and PPI inflation data earlier this week.

ING commented; “While soft US CPI data has taken the sting out of the dollar's upside, it is probably too early to look for a much lower dollar just yet.”

According to MUFG; “Despite the muted FX reaction, the scale of weakness in the CPI report certainly helps weaken the key pillar of support for the dollar – the prospect of a near-term hike. That can open up scope for further dollar depreciation. However, it is difficult to trade with conviction given the re-escalation in the conflict in the Middle East and the 13% surge in crude oil prices this week.”

In testimony to the House Financial Services Committee on Tuesday, new Fed Chair Warsh maintained a generally hawkish stance.

He stated that the central bank has "no tolerance" for persistently elevated inflation, and vowed to "do my job" if challenged by U.S. President Donald Trump.

He also stated that he is committed to the dual mandate of 2% inflation and maximum employment.

MUFG commented; “The testimony from Fed Chair Warsh looks to have curtailed the move weaker for the dollar. Just like following his first FOMC meeting, Warsh spoke with conviction in relation to the Fed achieving its 2% inflation goal. The CPI print was not “mission accomplished” and he wasn’t going to “cherry pick” data.

The bank added; “We don’t really view this as “hawkish” given he is merely promising to focus on what is the legal mandate of the Federal Reserve. However, he again is emphasising his inflation fighting credentials.”

According to Scotiabank; “We remain of the view that Fed tightening risks this year are mispriced and soft CPI data this morning (plus the soft NFP report for June) may act to curb some of the market’s enthusiasm for rate hikes.”

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TAGS: Pound Dollar Forecasts