Pound to Dollar Week-Ahead Forecast: Potential for GBP Retreat to 1.3250

Modified: Monday, 27 July 2026 07:01 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week-Ahead Forecast: Potential for GBP Retreat to 1.3250

The Pound to Dollar exchange rate (GBP/USD) fell to three-week lows near 1.3300 as renewed UK fiscal concerns combined with higher energy prices and a firmer US Dollar.

Attention is now firmly on the gilt market, with Sterling likely to remain vulnerable if investors question the funding of the Burnham government’s early policy measures

GBP/USD Forecasts: All eyes on UK bonds

Goldman Sachs expects the Pound to Dollar (GBP/USD) exchange rate will retreat to at least 1.3250.

According to Goldman the Pound strengthened too far; “We have noted throughout the past year that bouts of premium that see Sterling underperform cyclical fundamentals are typically reversed and we think the same argument applies in the opposite direction here.”

Scotiabank, however, expects GBP/USD gains to 1.37 by the end of this year.

GBP/USD dipped to 3-week lows at 1.3300 during the week amid a firm dollar and Pound correction.

A jump in energy prices boosted the dollar while renewed fiscal doubts hampered the Pound.

After appointing Healey as Chancellor, Prime Minister Burnham announced three measures to alleviate the cost of living, but there were concerns over funding.

Standard Chartered commented; “Policies that promote investment and growth while respecting fiscal constraints would be broadly neutral to positive for the GBP. In contrast, unfunded spending commitments or a perceived weakening of fiscal discipline are likely to revive concerns over UK debt sustainability and weigh on the currency.”

It added; “Our base case is, therefore, a brief increase in GBP volatility, rather than a sustained directional move. GBP/USD is likely to remain more sensitive to the USD, US rate expectations, and upcoming UK fiscal announcements.”

According to MUFG; “The pound has performed well as investors appear to view the additional compensation for increased political risks as ample. Numerous factors could change to alter this – political fiscal developments could worsen, inflation expectations could rise which could alter the risk-reward profile related to the political uncertainty.”

Scotiabank is more positive on the Pound; “The choice of former Defence Secretary Healey for Chancellor of the Exchequer has been relatively well accepted by markets, and overall communication has emphasized a respect for ex-Chancellor Reeves’ self-imposed fiscal rules.”

Energy prices will have an important impact on central banks and currencies.

ING maintains a positive dollar stance for now; “Crucially – and after the June FOMC meeting – the market believes the Federal Reserve will have to respond as well. While we do not think the Fed will hike next week, it remains very dangerous to fight this trend and, as we have been saying all week, we expect the dollar to outperform.”

Scotiabank, however, expects the dollar to lose ground; “A greater bearish risk lies with the potential for a definitively dovish turn if the Fed reframes its inflation mandate in favour of narrower measures that have been previously highlighted by the newly arrived Fed Chair.”

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TAGS: Pound Dollar Forecasts