Pound to Dollar Week Ahead Forecast: GBP Hits 6-Month Best on US Bond Turmoil

Modified: Monday, 24 August 2026 07:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: GBP Hits 6-Month Best on US Bond Turmoil

The Pound to Dollar exchange rate (GBP/USD) has held close to six-month highs above 1.3650 after renewed turbulence in the US Treasury market triggered another bout of Dollar selling.

Pound Sterling has also benefited from improved confidence in the UK's political transition, leaving investors focused on whether GBP/USD can now convert its recent advance into a sustained breakout.

GBP/USD Forecasts: Bond-market turbulence

UBS forecasts that the Pound to Dollar (GBP/USD) exchange rate will strengthen to 1.41 by March 2027 on a firm Pound tone and dollar losses.

Danske Bank, however, expects GBP/USD will retreat to 1.29 on a 12-month view amid a stronger dollar and Pound retreat.

As the dollar came under pressure, GBP/USD jumped to 6-month highs above 1.3650 during the week before a limited correction.

Bank of America sees scope for a breakout from recent narrow ranges; “GBPUSD stuck in a maturing triangle pattern and on watch for a chasable breakout.” It added; “A weekly close above 1.3558 favours 1.3660/1.3850/1.4000.”

The UK data releases were close to expectations during the week and had only limited impact.

There was strong upward pressure on yields during the week with the 30-year yield at 19-year highs. The dollar retreated sharply after the US Treasury announced it would increase the buying of long-term bonds to help ease upward pressure on long-term yields.

MUFG commented; “if Scott Bessent really believes that then the US Treasury could play a key role here by of course addressing the ever-expending fiscal deficit with fiscal consolidation. We all know that’s not going to happen and hence the danger now following this announcement is that it proves counter-productive and leads to reduced appetite for either holding US assets (UST bond sales) or reduced appetite for exposure to the US dollar (dollar selling) or both.”

UBS sees scope for dollar losses; “In our view, markets are likely to reduce expectations for Fed tightening in the coming months If rate hikes are fully removed from market pricing existing long dollar positions could be unwound.”

Scotiabank is also cautious over the dollar outlook; “Of the factors that supported the USD in the past few months, the most compelling was the repricing of the Fed policy outlook. Now, however, markets are wondering whether the hawkish pivot at the June FOMC will amount to anything meaningful.”

UBS maintains a positive Pound stance; “An orderly leadership transition and the appointment of a Chancellor seemingly intent on maintaining the UK's fiscal credibility have improved market confidence. Attention will now turn to the new government's policy proposals and the November budget, particularly how any fiscal measures are financed.”

It added; “If markets continue to view these plans as credible, sentiment toward UK assets could improve further.”

Bank of England (BoE) policy will also be a key element with markets pricing in at least one hike before year-end.

Danske Bank is not backing BoE rate hikes; “Our base scenario is an unchanged Bank Rate until the fear of spillover effects on inflation has subsided and the BoE can resume its cutting cycle again by summer 2027.”

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TAGS: Pound Dollar Forecasts