Modified: Monday, 16 March 2026 09:01 BST

– Written by


Frank Davies

STORY LINK British Pound to Dollar Forecast: BoE Policy Doubts Weigh on GBP

The Pound to Dollar exchange rate (GBP/USD) slipped to three-month lows below 1.3250 as weaker UK growth data and rising energy prices weighed on Sterling while safe-haven demand boosted the US dollar.

With markets reassessing Bank of England policy expectations and geopolitical tensions continuing to dominate sentiment, analysts warn that Sterling could remain vulnerable if energy prices stay elevated and risk appetite deteriorates further.

GBP/USD Forecasts: BoE panic?

Credit Agricole forecasts that the Pound to Dollar (GBP/USD) exchange rate will retreat to 1.30 by the end of 2026.

UBS, however, expects buying close to current levels with a year-end forecast of 1.40.

GBP/USD lost ground during the week amid defensive dollar demand, weaker risk appetite and weaker than expected GDP data. The pair dipped sharply to 3-month lows below 1.3250.

Middle East developments and energy prices are liable to remain dominant in the short term.
MUFG noted underlying risks; “The energy price shock has begun to spill over into broader financial markets, triggering a deepening sell‑off in global bond and equity markets and contributing to a stronger USD.”

It added; “Iran upping attacks on production facilities would be hugely impactful and we would likely see significant further increases in crude oil and natural gas prices. The dollar would advance further and equities would start to suffer more.”

According to UBS; “If the war goes on for longer, we continue to see support for the dollar. However, over the medium term, we expect the war to end and oil prices to fall back, and for weaker fundamentals to weigh on the USD.”

The Bank of England (BoE) and Federal Reserve will both announce their latest interest rate decisions in the week ahead.

There has been a big shift in expectations surrounding the BoE. Ahead of the Middle East conflict, markets were very confident that rates would be cut to 3.50%. These expectations have now disappeared amid the jump in energy costs with markets pricing in the risk of a rate hike by year-end.

Credit Agricole is sceptical over the new pricing; “In all, we think the BoE may not ‘validate’ the latest aggressive shifts of the UK market rates outlook and this could leave the GBP vulnerable.”
There are no expectations that the Fed will cut at this meeting. There are still underlying reservations surrounding the US currency.

Scotiabank warned over medium-term dollar risks; “The USD remains broadly supported by safe‑haven demand for now. However, the risk of conflict‑driven blowback on the dollar is becoming clear. The narrowing in interest‑rate differentials versus key peers that we have already seen unfold in the past few months may accelerate if central banks excluding the Fed respond to building price pressures.

It added; “In addition, a more accommodative Fed at a time of elevated inflation risks would erode real returns on USD assets, undermining the currency’s relative appeal.”

Domestically, UK GDP data was weaker than expected with no change for January compared with consensus forecasts of a 0.2% increase.

Weak growth and higher bond yields would pose notable risks to the fiscal outlook.

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TAGS: Pound Dollar Forecasts