Pound-to-Dollar Forecast: Below 1.35 Despite Strong UK Data

– Written by


David Woodsmith

STORY LINK Pound-to-Dollar Forecast: Below 1.35 Despite Strong UK Data

The Pound to Dollar (GBP/USD) exchange rate dipped below the 1.3500 support area on Thursday with 4-week lows below 1.3450 amid dollar gains.

Strong data boosted the Pound globally, but GBP/USD gains were held to around 1.3475. GBP/USD will need to regain 1.35 to secure a more favourable outlook.

The dollar was underpinned by a scaling back of expectations surrounding US rate cuts as Fed Governor Miran adopted a less dovish stance.

Commonwealth Bank of Australia strategist Joseph Capurso commented; “It wouldn’t surprise me if the U.S. dollar keeps lifting for a while longer.”

The dollar was also underpinned by speculation over US military action against Iran, although the dynamics are not clear cut.

ING noted dollar gains when oil prices rise; “This highlights a key characteristic of the dollar in post‑Liberation Day markets: its safe‑haven appeal is generally diminished, but is fully restored when geopolitical tensions trigger oil shocks.”

There was a triple boost for the UK economy from the latest data releases.

The government posted a strong public-sector surplus of £30.4bn for January compared with a surplus of £14.5bn the previous year. January is always a strong month given the boost to tax receipts.

For the first 10 months of fiscal 2025/26, the budget deficit declined to £112.1bn from £126.7bn the previous year.

There was a revenue boost from a technical jump in capital gains tax receipts. Paul Dales, chief UK economist at Capital Economics commented; “This is not a sustainable improvement. And the big picture is that borrowing has failed to come down much this year.”

According to the ONS, retail sales volumes increased 1.8% for January, well above consensus forecasts of a 0.2% gain and following a 0.4% increase the previous month. On a 3-month basis, however, sales only increased 0.1% compared with the previous 3-month period.

The UK PMI manufacturing business confidence index edged higher to an 18-month high of 52.0 for February from 51.8 previously and above consensus forecasts of 51.5 while the services-sector reading was only marginally lower at 53.9 from 54.0. The composite output index hit a 22-month high for the month.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented;

“The early PMI data for February bring further signs of an encouraging start to the year for the UK economy.”

Output charges increased at the fastest rate since April 2025 which will cause some doubts over the potential for sharp Bank of England rate cuts.

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TAGS: Pound Dollar Forecasts