– Written by
David Woodsmith
STORY LINK Pound Sterling to Dollar Forecast: GBP Rebounds above $1.34 on USD Shock
The Pound to US Dollar exchange rate (GBP/USD) climbed on Monday after markets were rattled by news of an investigation involving the Chair of the Federal Reserve, which weighed heavily on the US Dollar.
At the time of writing, GBP/USD was changing hands near $1.3465, up around 0.5% from Monday’s opening levels.
The US Dollar (USD) came under sharp pressure at the start of the week following reports that Federal Reserve Chair Jerome Powell is the subject of a criminal investigation by the US Department of Justice.
The probe reportedly relates to Powell’s testimony to Congress over the Federal Reserve’s $2.5bn headquarters refurbishment project. In response, Powell issued a statement claiming the investigation is politically motivated and aimed at influencing the central bank’s interest rate decisions.
President Donald Trump has repeatedly criticised Powell for not cutting interest rates more aggressively, and the latest developments have reignited concerns among investors about the independence and credibility of the Federal Reserve.
These fears weighed heavily on the ‘Greenback’, prompting a broad-based sell-off as markets reassessed the outlook for US monetary policy governance.
Despite benefitting from a weaker US Dollar, the Pound (GBP) struggled to generate broader momentum on Monday.
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Sterling underperformed against several other major currencies amid signs that UK business confidence deteriorated toward the end of 2025. Surveys from KPMG and the Recruitment and Employment Confederation pointed to a marked drop in sentiment, with firms scaling back hiring plans in response to rising costs and persistent uncertainty.
The slowdown in recruitment is a particular concern for GBP investors, as it may bolster the case for the Bank of England (BoE) to accelerate its monetary easing cycle in the months ahead.
GBP/USD Forecast: Cooling US Inflation to Extend Dollar Weakness?
Looking ahead, the Pound to US Dollar exchange rate may look to build on its gains on Tuesday as attention turns to the latest US inflation data.
If December’s consumer price index confirms a further easing in price pressures, it could reinforce dovish expectations within the Federal Reserve and encourage markets to bring forward bets on the next US rate cut, potentially extending losses in the US Dollar.
With little in the way of major UK economic releases scheduled, Sterling is likely to continue taking its cues from developments in the US and shifts in broader market sentiment.
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TAGS: Pound Dollar Forecasts
