– Written by
Tim Boyer
STORY LINK Pound to Dollar Week Ahead Forecast: Rate Cut Expectations Cap GBP Recovery
The Pound to Dollar exchange rate (GBP/USD) is attempting to stabilise above 1.35 after a volatile week that exposed vulnerabilities in both the UK and US outlooks.
Weak UK labour-market data and softer inflation initially dragged Sterling to four-week lows below 1.3450, but stronger retail sales and easing US dollar momentum helped limit deeper losses.
With markets pricing further Bank of England rate cuts while also questioning the durability of US growth and Federal Reserve policy, GBP/USD is increasingly caught between two soft fundamental backdrops.
GBP/USD Forecast: Balancing weak fundamentals
RBC Capital Markets (RBC) forecasts that the Pound to Dollar (GBP/USD) exchange rate will edge higher to 1.36 by the end of 2026 with the Pound and dollar both struggling for sustained support.
Danske Bank expects a net GBP/USD advance to 1.40 on a 12-month view.
Weak labour-market data and a decline in inflation undermined the Pound for much of the week and GBP/USD dipped to 4-week lows below 1.3450 amid dollar gains.
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Stronger than expected releases for retail sales and government borrowing helped stabilise confidence and the dollar surrendered some gains with GBP/USD edging back above 1.35 after the US Supreme Court ruled against President Trump’s reciprocal tariffs.
Scotiabank commented on the short-term outlook; “For GBPUSD, technicals are bearish following the break of the 50 day MA (1.3529), with risk of a push below the 200 day MA (1.3445) and a test of the January lows in the mid-1.33s.”
GBP/USD will need to break back above 1.3530 to improve the outlook.
The UK jobs and wages data reinforced market expectations of a near-term Bank of England rate cut.
RBC commented; “Our economist is calling for two further cuts in March and July. The risks look clearly skewed towards more cuts being delivered than is being priced in. The labour market is displaying growing cracks.”
The bank also noted wider concerns could resurface; “That uncertainty surrounding Budgets has largely been eliminated going into 2026 which should make sterling more immune to selling pressure. However, new fiscal risks have emerged from a potential change in leadership of the governing party.”
Nomura head of G10 FX strategy Dominic Bunning commented on the fundamental outlook; “Economic data published earlier in the week added to dovish expectations for the Bank of England’s monetary policy.”
Standard Chartered sees net dollar losses; “We foresee a gradual downside risk for the USD in the near term as US economic growth slows and the Fed’s policy stance becomes less USD-supportive relative to other global central banks.”
According to Scotiabank; “We think risks remain tilted towards more USD losses in the medium term from a fundamental point of view (easier Fed policy, reduced US growth advantage, investor rebalancing overweight USD portfolios).
It added; “Seasonal patterns turn more USD-negative as we get into the spring period.”
The bank did point to the possibility of a stronger performance; “We will be sensitive to shifting expectations regarding the Fed policy outlook; growth is firm and inflation remains sticky which may dampen expectations for H2 Fed cuts. Heightened market volatility could revive the USD’s haven credentials.”
Standard Chartered also maintains a bearish stance on the Pound; “GBP remains vulnerable to downside risks due to ongoing concerns regarding domestic growth.”
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TAGS: Pound Dollar Forecasts
