Pound to Dollar Forecast: GBPUSD Bullish to 1.34 for Buyers

April 20, 2025 - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBPUSD Bullish to 1.34 for Buyers

After an initial retreat, Commerzbank expects the Pound to Dollar exchange rate (GBP/USD) gains to 1.39 by Q2 2026 as the dollar loses traction.

ING sees scope for near-term GBP/USD gains, but expects slight losses to 1.30 on a 12-month view as European currencies fail to hold gains.

US equities struggled during the week, but there was a net easing of volatility and overall risks premiums edged lower which helped cushion risk appetite.

With a more benign environment and a fragile dollar, GBP/USD strengthened to 6-month highs just below 1.3300 before stabilising.

Even with more benign conditions, uncertainty remains extremely high.

SocGen commented; “Both trade uncertainty and FX volatility peaked on 9 April, coinciding with heightened tensions in global trade dynamics. This moment could mark a critical juncture in the trade war, potentially signalling either a pause or the peak of the trade risk premium.”

US retail sales data held firm for March, but there were significant earning signs in the latest business confidence readings with expectations of weaker activity and higher inflation.


High-frequency economic indicators will continue to scrutinised very closely.

SocGen commented; “The current de-coupling between rates and FX makes sense in the context of huge foreign exposure to US asset at a time of turbulence but the key question is still the US economy is going to slow as much and as fast as the market thinks.”

If the economy holds firm, the dollar could gain renewed support, but evidence of a slide in activity would be damaging.

UBS commented; “Looking ahead, Wednesday’s release of the first global purchasing managers’ index (PMI) data since recent tariff announcements will be pivotal. A relatively weaker US PMI versus the rest of the world could reignite the USD downtrend.”

Fed Chair Powell reiterated that he was in no rush to adjust interest rates, while stating that the tariff impact is likely to be larger than expected with weaker activity and higher inflation.

MUFG commented; “That to us does not sound like a central bank that will be rushing to cut rates and there remains an increasing risk that the Fed could delay for longer than the markets expect to cut rates.”

President Trump maintained calls for lower interest rates and criticised Powell very strongly and effectively called for him to resign.


The Administration’s currency policy will also be a key element.

According to Commerzbank; “In the coming months, the dollar should recover somewhat, as markets are pricing in Fed rate cuts too early.”

It expects GBP/USD will dip bank below 1.30 this quarter.

It added; “But if it becomes clear later in the year that Donald Trump does not want the appreciation of the dollar to partially offset the effects of his tariff increases, he is likely to publicly put the Fed under pressure. In this environment, investors are likely to increasingly doubt that the Fed will act decisively, which would weigh on the dollar.”

Danske Bank commented; “Tariff shocks, stagflation fears, consumer and business uncertainty and tightening financial conditions all challenge the long-standing narrative for US exceptionalism.”

It added; “The usual macro drivers are no longer behaving as expected, reinforcing our view that the USD is losing its traditional anchors.”

According to Scotiabank; “A weaker USD seems to be a likely outcome of US trade policy—either indirectly in the longer run as the US capital account surplus runs down alongside the reduction in the US trade deficit or more directly as the US seeks a more competitive currency arrangement against its major trading partners.”

The dollar will be much more vulnerable if there is a wider loss of confidence.

Scotiabank added; “There may be early signs of shift in perception as to the reserve currency status of the U.S. dollar and an associated decline in the perceived safety of American government debt.”

ING added; “We do think FX reserve managers will be cutting the dollar shares in their FX reserves this year. As one of the big five reserve currencies, sterling does benefit from the dollar diversification trade.

It added; “GBP/USD is also very much driven by EUR/USD trends – where fiscal stimulus will be helping in Europe too.”

Following the latest UK labour-market and inflation data, markets remained convinced that there will be a Bank of England rate cut in May.

The UK data will also be monitored very closely given the fiscal and monetary policy implications.

ING commented; “Domestically, we’re waiting on the UK data to show whether unemployment is rising or inflation is falling. We think the market is right to forecast three more Bank of England cuts this year, starting in May.”

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