– Written by
Tim Boyer
STORY LINK Pound to Dollar 2026 Forecast: USD Safe-Haven Role Not Dead Yet
The Pound to Dollar exchange rate (GBP/USD) rebounded after an initial sell-off triggered by fresh tariff threats from President Trump, with the dollar failing to hold gains as markets reassessed the broader US outlook.
The episode underlines growing sensitivity to geopolitical and policy risks, leaving the pound vulnerable to swings in risk sentiment but also highlighting limits to the dollar’s defensive appeal.
GBP/USD Forecasts: Recovery from 1-Month Low
The Pound to Dollar (GBP/USD) exchange rate briefly dipped to 1-month lows below 1.3350 in immediate response to the fresh threat of tariffs from US President Trump before rallying to the 1.34 area. The Pound was hurt by weaker risk appetite, but the dollar then lost ground amid unease over the US outlook.
Risk appetite, the duration of the Greenland crisis, and the dollar’s global status will be crucial elements in the near term.
Equity markets lost ground on Monday and there was a dip in risk appetite while the Swiss franc gained ground.
A key question is whether the dollar will benefit from defensive demand or weaken amid fears over US policy actions.
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On Sunday, President TRump stated that the US would impose 10% tariffs on goods from 8 European countries, including the UK, if there is no deal to sell Greenland to the US and the tariffs would increase to 25% from June 1st.
Danske Bank noted; “Attention now turns to updates from the extraordinary summit of the European Council expected in the coming days, along with developments from the World Economic Forum, which is taking place throughout this week.”
ANZ head of Asia research Khoon Goh noted potential dollar risk; “ as we’ve seen last year as well, when the ‘Liberation Day’ tariffs were getting put in place, the impact in FX markets actually has been more towards dollar weakness every time there is heightened policy uncertainty emanating from the United States.”
Rabobank chief currency strategist Jane Foley warned against writing off the dollar; “The market has been understandably anxious about the dollar’s decline in value since last April. But I would really caution against assuming that the dollar’s safe-haven status is gone.”
ING commented; “It is probably a little too early to be dusting off the ‘Sell America’ theme, where Washington’s pursuit of Greenland, like the near 50% Liberation Day tariffs last April, is seen as a spectacular own-goal. Certainly, investors seem very wary of chasing themes like these, which typically look like noisy rhetoric before diplomacy plays out.”
It added; “Nonetheless, these developments will add some volatility in an otherwise benign/calm investment environment.”
MUFG pointed to the wider context; This tariff escalation needs to be viewed in the context of other developments, in particular the upcoming decision on the new Fed Chair and the possible imminent Supreme Court decision on the legality of using IEEPA to implement reciprocal tariffs globally.
A quick resolution to calm the atmosphere would tend to reassure markets.
According to MUFG; “What will likely contain the sell-off for the dollar (DXY just -0.3%) is the fact that this tariff is only effective 1st February and investors will be aware of the potential for Trump to back down on some form of “deal” being done.”
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TAGS: Pound Dollar Forecasts
