Pound to Dollar 2025 Forecast Update: 1.19-1.29 Analyst Ranges

March 2, 2025 - Written by Frank Davies

STORY LINK Pound to Dollar 2025 Forecast Update: 1.19-1.29 Analyst Ranges

Foreign exchange analysts at Wells Fargo have adjusted their forecasts slightly with reduced scope for dollar gains but still expect the Pound to Dollar exchange rate (GBP/USD) will retreat to 1.23 at the end of 2025 with further losses to 1.19 the following year amid dollar strength.

After a near-term dip below 1.20, UBS still forecasts GBP/USD gains to 1.29 at the end of this year as the US currency comes under pressure.

GBP/USD hit 2-month highs above 1.2700 during the week before a sharp retreat to around 1.2570 as the major Trump-Zelensky row destabilised diplomatic efforts to find a cease-fire deal and increased European security fears.

SocGen looked at the GBP/USD technical outlook; “Ongoing up move could persist towards the 200-DMA at 1.2785/1.2810 which is likely to be a potential resistance zone.”

ING is much less confident on the short-term Pound outlook amid domestic concerns; “later in March, the refocus on the domestic UK story - and probable government spending cuts - could send GBP/USD all the way back to 1.22/23.”

US tariff policy as well as Ukraine developments will remain a key short-term element.

European currencies will be vulnerable on security fears if the US threatens to pull out of NATO and end all support for Ukraine.

Trade tensions will also tend to support the dollar, but the US will be vulnerable if the US economy slides towards recession.

President Trump is threatening to impose 25% tariffs on Mexico and Canada from March 4th, but markets still expect that there will be a further delay or deal to stop implementation.

Wells Fargo commented; “With market participants less focused on tariff headlines, and maybe only tariff policy implementation, the U.S. dollar can see less support from safe-haven capital flows. While we still forecast dollar strength into mid-2026, we see less dollar strength relative to last month's forecast.”

The bank still considers underlying fundamentals will support the US currency; “we still believe the U.S. dollar can strengthen as the Fed shifts less dovish at a time when foreign central banks are lowering interest rates.”

It added; “Also, U.S. economic growth continues to outpace foreign economy growth, and growth divergences should also be a pillar of support for the greenback over the medium term.”

Tariffs will remain a key issue with the April 1st deadline for the wider US trade review.

According to UBS; “Trump’s tariff plans remain a wildcard for markets as well, including the currency market. A larger-scale trade war is likely to be USD-positive initially. This could prolong USD strength beyond 1H25.”

The US Administration, led by DOGE is also pursuing an aggressive policy to cut government waste with a high number of firings.

The latest consumer confidence data recorded a sharp decline and there has been increased speculation that uncertainty is damaging the economy with investment and spending plans on hold.

According to ING; “The economy has started 2025 on a weak footing with the 'negatives' from President Trump's policy thrust taking an early toll via weaker consumer confidence and spending at the same time as importers look to front run the threat of tariffs.”

HSBC commented; “recent cuts to the US federal workforce and associated knock-on effects are becoming a growing concern for the market.”

MUFG also considers that tariffs could backfire on the domestic economy; “Data on consumer confidence already shows the negative impact and rising inflation expectations related to the threat of tariffs and we will likely see a further hit to confidence and a further slowdown in consumer spending.”

UBS added; Longer term, a full-out trade war would still be harmful for the US economy.”

UK developments took a backseat during the week, but there was a shift in stance from a Bank of England Deputy Governor. Ramsden stated that he was uneasy over wage developments in the UK and that risks to inflation are no longer to the downside.

He stated that risks are more balanced while the outlook is more uncertain.

Inflation concerns could delay further BoE rate cuts, potentially underpinning the Pound if the economy can hold firm.

Fiscal policy will also be a growing influence, especially given pressures for increased defence spending.

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TAGS: Currency Predictions Pound Dollar Forecasts