Modified: Monday, 23 February 2026 19:31 BST

– Written by


Tim Boyer

STORY LINK GBP/USD Forecast: Pound Sterling Firm but Political Risks Linger

The Pound to US Dollar (GBP/USD) exchange rate found a modest footing at the start of the week, with USD being dented by US trade policy uncertainty.

At the time of writing, GBP/USD hovered close to $1.3480, unchanged from the session’s opening levels.

The US Dollar was muted at the start of this week as investors grappled with fresh uncertainty linked to US tariff strategy.

This follows the US Supreme Court ruling on Friday overturning Donald Trump’s tariff framework introduced under emergency economic powers legislation. In response, the White House swiftly announced a new blanket tariff of 10%, which was then increased to 15% over the weekend.

The rapid sequence of policy changes has left investors seeking clarity, particularly regarding whether previously negotiated trade arrangements remain valid and whether US importers could reclaim costs tied to earlier duties.

Despite this uncertainty weighing on sentiment, downside pressure on the ‘Greenback’ remained somewhat limited as geopolitical tensions, including speculation over possible US military action involving Iran, encouraged some cautious positioning.

Sterling edged higher through Monday’s trading session, building on momentum generated by a run of upbeat UK data released late last week.

Stronger retail sales figures, alongside resilient PMI readings, helped reinforce confidence in the UK’s economic outlook. These releases were complemented by data showing the government recorded a sizeable budget surplus in January, welcome news for Chancellor Rachel Reeves ahead of the upcoming Spring Statement.

However, gains in the Pound were restrained by domestic political uncertainty ahead of Thursday’s Greater Manchester by-election.

A weaker-than-expected performance for the Labour Party could renew scrutiny surrounding Prime Minister Keir Starmer’s leadership, introducing an additional layer of risk for GBP investors.

GBP/USD Forecast: Inflation Outlook and BoE Testimony in Focus

Movement in the Pound US Dollar exchange rate may hinge on comments from Bank of England Governor Andrew Bailey and Monetary Policy Committee member Megan Greene, who are due to appear before the Treasury Committee on Tuesday.

Any indication that policymakers are becoming more comfortable accelerating interest rate cuts as inflation slows could weigh on Sterling sentiment.

Meanwhile, with the US economic calendar relatively quiet, the US Dollar may remain primarily driven by developments surrounding trade policy uncertainty during the early part of the week.

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TAGS: Pound Dollar Forecasts