Pound to Dollar Week Ahead Forecast: Warsh's Fed Credibility Faces Market Test

Modified: Monday, 10 August 2026 07:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: Warsh's Fed Credibility Faces Market Test

The Pound to Dollar exchange rate (GBP/USD) has held close to 1.3500 as subdued volatility and fading expectations of Federal Reserve rate hikes keep the pair trapped within recent ranges.

Attention is increasingly focused on Fed Chair Kevin Warsh, with investors questioning whether the central bank's hawkish rhetoric will ultimately translate into tighter monetary policy.

GBP/USD Forecasts: Warsh under the microscope

ING has a 12-month Pound to Dollar (GBP/USD) exchange rate forecast of 1.33 with narrow ranges prevailing.

UBS, however, expects gains to 1.40 as the dollar loses ground.

UBS still has dollar doubts; “While the central bank has maintained a hawkish stance, its decision to leave rates unchanged in July has raised questions about the conviction behind its commitment to return inflation to target. As a result, markets are questioning whether the Fed will eventually follow through with a rate hike.”

After strong gains the previous week, GBP/USD was little changed close to 1.35 as the dollar dipped after weaker than expected US jobs data.

Overall market volatility remained subdued despite on-going volatility in technology stocks.

ANZ noted the risk of complacency; “Despite risks stemming from ongoing geopolitical uncertainty, 1-month and 2-month at-the-money implied volatility recently fell to its lowest level in 10 years. We do not expect volatility to remain at such depressed levels and see value in buying downside GBP protection.”

UK monetary policy will also be a key element.

MUFG noted the underlying dynamics and impact of energy prices; “If there is de-escalation and a decline in upside inflation risks, UK yields should fall and take the pound lower. If the conflict worsens and energy prices rise further, a rate hike is possible but hiking into weak domestic economic conditions is unlikely to be currency supportive.”

UK fiscal policy will also be a key element once the Summer recess is over.

CIBC commented; “The transition from PM Starmer to Burnham has been characterized as moving from doom mongering to Manchester (happy) vibes. Risk uncertainty notwithstanding, the prospect of a graduated improvement in consumer spending, amplified and supported by BoE monetary policy inertia, points towards modest GBP impetus over the next 12m.”

Markets are now less confident that the Federal Reserve will hike interest rates this year.

Standard Chartered still has a positive short-term dollar outlook; “We see firm US growth, sticky core inflation and firm real yield differentials supporting the USD in the near term. Even soft consumer inflation prints have failed to break the USD, validating a bullish asymmetry in the near term.”

ING is not convinced there will be a breakout; “GBP/USD continues to trade in the middle of a 1.32-1.36 range, and it is hard to see a breakout happening anytime soon. Kevin Warsh’s dovish July FOMC press conference took the sting out of the dollar’s rally, but equally on the UK side, the BoE meeting was slightly dovish. At some stage 45bp of expected BoE tightening gets removed.

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TAGS: Pound Dollar Forecasts