Pound to Dollar Week Ahead Forecast: 1.25-1.44 Bank Projections

March 30, 2025 - Written by David Woodsmith

STORY LINK Pound to Dollar Week Ahead Forecast: 1.25-1.44 Bank Projections

Currency analysts at Bank of America expect a surge in the Pound to Dollar exchange rate (GBP/USD) to 1.44 at the end of 2025 with further strong gains to 1.56 at the end of next year.

Wells Fargo has adjusted its forecasts slightly, but still expects that GBP/USD will dip to 1.25 at the end of 2025. It also expects further losses to 1.21 by the third quarter of 2026.

GBP/USD found support around 1.2870 during the week, but was held below 1.3000.

The UK government announced further cuts to welfare spending in the Spring Statement. Notionally, the slowdown in spending growth allowed the OBR to forecast that the government would meet its fiscal rules with projected headroom of close to £10bn at the end of the 5-year period.

There are, however, concerns that further adjustments will be needed in the form of tax increases.

The 2025 OBR GDP growth forecasts was halved to 1.0% while medium-term growth forecasts were revised marginally higher.

Trade considerations will be very important in the short term.

HSBC commented; “the UK is a small, open economy heavily dependent on global and European economic growth. If tariffs disrupt global trade, the UK will not be unscathed even if the government negotiates lower tariff rates.”

The bank added; “USD bears might argue that an increase in tariffs is already in the price of other currencies, or that higher tariffs will be just as damaging to the US economy as others. We disagree.”

The bank has an end-2025 GBP/USD forecast of 1.23.

Bank of America is concerned over the US outlook; “The new US administration talks about spending cuts and much lower deficits, while the market was expecting tax cuts; the US is also more aggressive on tariffs that the consensus was expecting. This has led to downward revisions in US growth expectations and upward revisions in inflation forecasts.”

It added; “Clouds of uncertainty are forming over the dollar, as stagflationary policy impulses weigh on market sentiment, and risk derailing US economic activity.”

On the UK and global economy, BoA added; “a higher global tariff environment is a global and inflation headwind but with the US Administration set to target countries which have a large surplus, the UK falls out of this category, whilst benefiting from a largely service-based economy.”

Wells Fargo still expects tariffs will support the dollar and added; “To be clear, while we have elaborated on reasons for less U.S. dollar strength over the coming quarters, we still see solid reasons for overall U.S. dollar strength.”

The bank also sees wider dollar support; “Even with some slowing, the pace of U.S. growth will still exceed other major advanced economies, just by a lesser amount—an absolute GDP growth advantage that should still support U.S. dollar gains.”

Markets and investment banks are still discussing whether there will be a structural retreat from the dollar amid the radical shift in US Administration policies.

ING noted the possibility of shifting dynamics; “The value of currencies in FX markets is typically driven by interest rate differentials, with FX effectively being seen as an extension of monetary policy. With so much uncertainty about the current US administration's policy, we in the market are on the lookout for new narratives.

It added; “For example, could FX reserve managers who hold close to $13tr in reserves be considering reducing their dollar composition?”

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TAGS: Currency Predictions Pound Dollar Forecasts