GBP/USD Forecast: Pound Sterling Posts 2025 Best Rate on Dollar Retreat

February 15, 2025 - Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Posts 2025 Best Rate on Dollar Retreat

Two elements have undermined the US Dollar (USD) over the last 24 hours, but the Pound Sterling (GBP) has made headway.

As markets closed, the Pound to Dollar exchange rate (GBP/USD) was seen trading at 1.25863, while the Dollar to Pound exchange rate (USD/GBP) was at 0.79452.

There has been some relief that the Administration has not moved immediately to impose reciprocal tariffs while lower yields have also undermined the US currency.

Although there are significant doubts surrounding the UK economy, the Pound has been one of the principal winners in global markets.

GBP/CHF, for example, hit 6-month highs just above 1.1400.

The Pound to Dollar (GBP/USD) exchange rate has strengthened to 2025 highs just below 1.2600.

UoB commented; “There has been a sharp increase in momentum, and we expect GBP to strengthen further.” It sees initial resistance at 1.2600 and 1.2650.

The Pound to Euro (GBP/EUR) exchange rate has edged above the 1.2000 level.

President Trump announced the potential for reciprocal tariffs on international trade partners overnight.

There will be no immediate move to impose tariffs with the Commerce Department engaged in complex calculations and an outcome is expected by April, although there could be a longer delay.

Rabobank commented; “Although the tariffs could cause upheaval in global trade, there is still plenty of hopium that world leaders will try to strike a deal with the US president.”

According to ING, “The outcome is likely to be perhaps some eye-wateringly large tariffs against some of the key countries with which the US runs a goods deficit. The EU will certainly be in the cross-hairs since it looks like Trump is using the threat of tariffs as leverage against the EU's digital service tax.”

ING added, “We have already been using the assumption of peak trade pressure in the second quarter of this year. The above looks consistent with that and it's why we think the dollar will move a little stronger into the second quarter. This means the current dollar dip should be a correction rather than a meaningful new trend.”

MUFG, however, is concerned that the Administration will be looking at non-tariff factors in deciding action.

In this context, the bank is also not convinced that the dollar retreat will be sustained; “Taking everything into consideration, we are not convinced that the initial US dollar sell-off on the back of investor relief that the “reciprocal tariffs” will not be implemented until at least April will be sustained for long.”

The headline US producer prices data was slightly stronger than expected, maintaining inflation concerns. However, The components that feed through into the PCE prices index were weaker than expected.

Given that the Federal Reserve targets the PCE prices index, the data offered some reassurance.

MUFG commented, “While it does not provide justification for the Fed to cut rates soon, it has helped to bring forward expectations for the timing of the next Fed rate cut a little.”

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TAGS: Pound Dollar Forecasts