Best Pound to Dollar Rate of Three Months ($1.28) as US Growth Fears Mount

March 5, 2025 - Written by Tim Boyer

STORY LINK Best Pound to Dollar Rate of Three Months ($1.28) as US Growth Fears Mount

Pound Sterling (GBP) rallied to a fresh three-month best exchange rate against the US Dollar (USD) on Wednesday as worries over US economic performance continued to weigh on USD sentiment.

At the time of writing, the Pound US Dollar (GBP/USD) exchange rate was trading at around $1.2849, marking a 0.4% increase from the day’s opening levels.

The US Dollar (USD) remained under pressure on Wednesday as mounting fears of a potential recession dented demand for the ‘Greenback’.

Concerns have intensified following the latest wave of tariffs imposed by US President Donald Trump on key trading partners, including Mexico, Canada, and China.

During a speech to Congress, Trump admitted that the US economy could face ‘a little disturbance’ in the short term, but markets fear the consequences could be more severe.

Investor unease was reflected in the bond market, where an inversion of the US Treasury yield curve—a classic signal of an impending recession—further fueled speculation that the US economy may struggle in the months ahead.

This has prompted a shift in expectations for the Federal Reserve’s monetary policy, with traders now betting on multiple rate cuts in 2025, increasing the likelihood of an initial cut as early as May.

The Pound (GBP) capitalized on USD weakness, with additional support coming from improving sentiment across European markets.

Investor confidence was lifted after German coalition talks resulted in an agreement to ease fiscal constraints, paving the way for increased government spending on infrastructure and defence.

The move is expected to inject much-needed stimulus into the Eurozone economy, with potential spillover benefits for the UK, further bolstering Sterling’s appeal.

Looking ahead, the upcoming US jobs report could play a pivotal role in shaping the Pound US Dollar exchange rate in the latter half of the week.

If non-farm payrolls data disappoints again, it may add to concerns over slowing US economic momentum and strengthen the case for an earlier Fed rate cut, accelerating USD losses.

Meanwhile, with little in the way of high-impact UK data, broader market sentiment will likely dictate GBP movement. Should risk appetite remain elevated, the Pound could continue its advance against a struggling US Dollar.

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TAGS: Pound Dollar Forecasts