– Written by


James Fuller

STORY LINK Pound to Dollar Forecast: Can GBP Sustain 1.36 as Rate Bets Shift?

The Pound to Dollar exchange rate (GBP/USD) is holding just below 1.3600, after rebounding from support near 1.3450, as markets continue to navigate a mix of central bank caution and geopolitical uncertainty.

The Bank of England has adopted a wait-and-see stance on interest rates, helping to steady Sterling, while broader dollar moves and Middle East developments remain the dominant drivers for GBP/USD direction.

GBP/USD Forecasts: BoE wait and see

Credit Agricole is relatively bullish on the Pound, but still forecasts that the Pound to Dollar (GBP/USD) exchange rate will retreat to 1.31 by the end of 2026 as the dollar strengthens.

GBP/USD found support close to 1.3450 during the week and spiked to highs above 1.36 before settling just below this level with overall ranges still relatively contained.

Scotiabank sees scope for further near-term gains; “We note the absence of any material resistance ahead of the January high in the mid/upper-1.38s.

Middle East developments will remain key elements across all currencies. According to Credit Agricole; “The ebb and flow of geopolitical risks should remain an important driver of the GBP as well, and GBP/USD could continue to follow the broad USD moves across the board.

The Bank of England held interest rates at 3.75% at the latest meeting with an 8-1 vote as Pill voted for a rate hike. The bank noted the importance of Middle East developments and the high degree of uncertainty over energy prices and the economic implications.

It outlined three scenarios of differing severity for underlying inflation. Under the first two, the implications for interest rates would be limited, but the severe scenario would require multiple rate hikes.

Traders are pricing in three rate hikes this year whereas many investment banks expect only one hike.

Credit Agricole sees scope for a firm Pound even if rate expectations are scaled back; “We further note that the GBP remained firm even though UK rates investors have pared back somewhat their rate expectations in the wake of the policy meeting. Despite the latest correction lower, however, the GBP remains one of highest yielding G10 currencies and the currency could continue to draw support from its considerable rate appeal.

It added; “We conclude that it may take a more meaningful drop of the GBP’s relative rate appeal to see the currency suffer.”

Scotiabank notes that markets have not fully priced-in a June rate hike and commented;.”We thus see scope for further fundamental strength in the pound.”

It also considers that investors may be over-pessimistic surrounding the outlook; “Bearish sentiment offers the potential for further upside as markets shake off lingering concerns related to the US/Iran conflict as well as the political uncertainty that continues to plague PM Starmer.”

The bank also sees scope for dollar weakness; “The USD has already faded a good portion of the geopolitically-driven risk premium that was observed from early March, but the DXY continues to trade above its fair value and see scope for further weakness.”

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TAGS: Pound Dollar Forecasts

The Japanese yen was largely unchanged on Monday morning as investors reacted to last week’s intervention by the Bank of Japan (BoJ). The USD/JPY exchange rate was trading at 158 on Monday, down from last week’s high of 160.

Bank of Japan intervention 

The USD/JPY exchange rate is in the spotlight this week as investors react to last week’s intervention, in which the Bank of Japan spent as much as $35 billion in yen buying.

This purchasing happened after the pair rose to the important resistance level at 160 for the first time in months. Yen buying is a situation where the central bank removes the currency from the market, a move meant to boost its demand. The last major intervention happened in 2024 as the currency plunged.

A weaker Japanese yen has a major impact on the economy. On the positive side, it helps to boost exporters like Mitsubishi, Toyota, and Komatsu, especially in the era of higher tariffs from the United States.

However, it hurts importers who now have to pay more money for their products. These importers have been hurt now that the US-Iran war has pushed commodity prices to the highest point in years.

The main risk for interventions is that the impact tends to be short-term. A good example of this is what happened in 2024 when the bank intervened. The USD/JPY pair has been in a strong uptrend since then.

This recent intervention came a few days after the Bank of Japan decided to leave interest rates unchanged, with officials hinting that they will hike later this year.

US non-farm payrolls data ahead 

The next main catalyst for the USD/JPY pair is the new statements by Donald Trump on the ongoing Iran war. In a statement, he said that the two sides were still negotiating, with the US responding to Iranian demands. This explains why the price of crude oil has slumped and why global stocks are rising.

The next important catalyst for the stock pair will be the upcoming US non-farm payrolls data on Friday this week.

These numbers will provide more information about the health of the American economy. Analysts expect the report to show that the economy created 78k jobs in April, much lower than the 153k it created in the previous month.

These numbers will not include the thousands of people laid off when Spirit Airlines filed for bankruptcy after the government funding failed. They will come a week after the Federal Reserve left interest rates unchanged.

USD/JPY technical analysis

USDJPY chart | Source: TradingView 

The daily timeframe chart shows that the USD to JPY exchange rate has pulled back in the past few days. This retreat started after the pair found substantial resistance at 160, where it formed a double-top pattern.

The pair has moved below all moving averages, while the Supertrend indicator has turned from green to red. Also, it is slowly forming a bearish flag pattern, which leads to more downside.

Therefore, the pair will likely continue falling, potentially to the next key support level at 155. A move below that level will point to more downside, potentially to 152, the lowest level in January. 

Copper price didn’t move anything by its confinement between $6.0500 level, while $5.8100 forms a key support against the attempt of resuming the bearish corrective trend, to fluctuate near $5.9100 level.

Providing positive momentum by the main indicators might increase the chances of surpassing the barrier, which opens the way for renewing the bullish attempts, to target several positive stations that might begin at $6.1200 and $6.2500, while breaking the support will force it to suffer extra losses by reaching $5.700 and $5.5900.

The expected trading range for today is between $5.8100 and $6.0500

Trend forecast: Sideways