Today's Pound to Dollar Exchange Rate Holds Near Best in Eight Weeks for Buyers

February 17, 2025 - Written by Frank Davies

STORY LINK Today's Pound to Dollar Exchange Rate Holds Near Best in Eight Weeks for Buyers

The Pound to Dollar (GBP/USD) exchange rate traded close to 1.2600 and close to an 8-week best on Monday with US markets closed for a holiday.

The UK 10-year yield spiked to 2-week highs around 4.60% early on Monday before a retreat to just below 4.55%.

According to Scotiabank the outlook is broadly positive on a short-term view; “A push through the low 1.26s should pave the way for additional gains to the mid-1.27s.”

ING, however, is sceptical that GBP/USD can advance or even hold gains; “We continue to doubt that GBP/USD can sustain gains over 1.26 and expect it to be trading back at 1.24 by the end of March.”

On Monday, Bank of England Governor Bailey played down the risk of a renewed increase in inflation; "The context is not really supporting the view that we will get more persistence, so we looked through that."

He added; "We still see the gradual disinflation going on. The after-effects of what happened two or three years ago are wearing off, but it is a gradual process.”

Markets noted the strong pressure to boost defence spending in the context of European security needs and considered that increased spending would tend to put upward pressure on bond yields.

The latest data on the labour market is due on Tuesday with the inflation figures on Wednesday.

Consensus forecasts are for an increase in the unemployment rate to 4.5% from 4.4% and this would be the highest level for over three years.

Annual wages growth, however, is expected to increase to 5.9% from 5.6%.

As far as inflation is concerned, the headline inflation rate is expected to increase to 2.8% from 2.5% with a jump in the core rate to 3.7% from 3.2%.

Weak labour-market data would increase reservations surrounding the growth outlook while stronger than expected inflation data would make it more difficult for the BoE to justify a faster pace of interest rate cuts.

In this context, there is the risk of increased market chatter over stagflation fears.

There was a lull in announcements US surrounding trade tariffs, but underlying tensions continued.

Nordea noted the dramatic shift since Trump won the election; “Times have indeed changed drastically in just 100 days, and hopefully the next 100 days will proceed at a somewhat more measured pace. Otherwise, there is a genuine risk that matters may spiral out of control, resulting in considerable negative consequences for the global economy.”

As well as trade tensions, markets are having to consider geo-political considerations with the US and Russia scheduled to hold talks over Ukraine in Saudi Arabia.

Equity markets have held firm, but some participants remain very uneasy over the situation.

Rabobank quoted a trader’s view; “a generation of market people who ‘don’t do geopolitics’ was always going to react like that rather than seeing the worrying bigger picture – but that just means that the reaction will be even larger when the penny finally drops for them.”

According to a leading exchange rate comparison website, the best US Dollar rate for overseas payments is 1.2539 USD, and the most competitive travel money / cash rates is 1.2481 USD.

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TAGS: Pound Dollar Forecasts