Goldman Sachs has upgraded its GBP forecasts across major currency pairs, citing better-than-expected UK growth, fiscal discipline, and limited direct exposure to US tariffs. Sterling has also benefited from political stability, a stronger services sector, and supportive rate differentials. With risks skewed in the UK’s favor compared to the Eurozone and signs of renewed investor appetite for GBP assets, Goldman now expects higher GBP/USD and lower EUR/GBP through the remainder of 2025 and into 2026.

Key Points:

1️⃣ Forecast Revisions: GBP Upgraded Across the Board 🔼

• GBP/USD

  • Old Forecasts: 1.25 (3M), 1.28 (6M), 1.30 (12M)

  • New Forecasts: 1.28 (3M), 1.32 (6M), 1.35 (12M)

• EUR/GBP

  • Old Forecasts: 0.86 (3M), 0.85 (6M), 0.84 (12M)

  • New Forecasts: 0.84 (3M), 0.83 (6M), 0.82 (12M)

2️⃣ Domestic Data and Political Factors Support GBP 📊

3️⃣ Tariff Exposure Lower Than Eurozone ⚖️

• UK is less exposed to looming US tariffs, reducing downside risks relative to EUR.

• Tariff-driven risk-off flows are less likely to hurt GBP than EUR.

4️⃣ Rate Differential Still Attractive 💷

Conclusion:

Goldman Sachs now expects stronger GBP performance across both USD and EUR pairs, driven by UK macro resilience, limited tariff exposure, and constructive investor sentiment. With GBP/USD revised up to 1.35 and EUR/GBP expected to slide to 0.82 by 12 months, the bank sees sterling as well-positioned for further gains, especially relative to the Euro.

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Tim Boyer

STORY LINK Euro to US Dollar Forecast: EUR Rallies, USD Slides on Fresh Jobs Shock

The Euro to Dollar (EUR/USD) exchange rate posted gains on the US shutdown and following weaker than expected US jobs data. It failed to hold initial 1-week highs amid a retreat on the crosses, but traded above 1.1750 and close to 1-week highs.

Scotiabank commented; “We are somewhat heartened by the prior break of the descending trend line drawn from the descending July highs and see little in terms of resistance ahead of 1.18 and the mid-September high just above 1.19.”

ING is also positive on the outlook; “we think the US government shutdown and the softer dollar story should dominate today and could be enough to drag EUR/USD to 1.1800/1820.”

Most investment banks, including ING, Scotiabank and MUFG expect medium-term EUR/USD gains to 1.20.

ADP reported a decline of 32,000 in private-sector jobs for September compared with consensus forecasts of an increase close to 50,000 while the August data was revised to slow a decline on 3,000 compared with the original reading of a 54,000 increase.

Chief Economist Dr. Nela Richardson commented; “Despite the strong economic growth we saw in the second quarter, this month’s release further validates what we’ve been seeing in the labor market, that U.S. employers have been cautious with hiring.”

Overnight, the US Senate failed to break the impasse on government funding and the government started to close down.

The shutdown comes at a particularly difficult time given uncertainty over the labour market and economy. The jobless claims data and employment report are liable to be postponed.

President Trump has also threatened to fire thousands of workers, adding to the uncertainty.

Scotiabank commented; “The shutdown may trigger government worker furloughs or layoffs and will halt the publication of key government data releases—such as Friday’s NFP report—which will compound investor concerns about the status of the US economy.”

MUFG sees scope for further vulnerability; “If Trump does follow through with firing workers and the shutdown becomes prolonged, the rates market will at least look to price a greater prospect of a rate cut in October and December, a scenario still not fully priced, which will likely weigh on dollar performance over the short-term.”

Following the data, markets were pricing in close to a 100% chance of a Fed rate cut at the October meeting and the chances of a further cut in December increased to near 90%.

The Euro-Zone inflation data met market expectations with the headline rate increasing to 2.2% from 2.0% with the core rate holding at 2.3%.

The data reinforced expectations that the ECB would hold rates steady in the short term.

According to Scotiabank, there is a green light for further Euro gains; “EUR fundamentals remain supportive as we note the renewed rise in Germany-US yield spreads, and sentiment is providing an added boost as the options market prices a greater premium for protection against EUR strength.”

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James Fuller

STORY LINK GBP/USD Forecast: Pound Sterling Climbs to $1.352 as Shutdown Pressures Greenback

The Pound to US Dollar (GBP/USD) exchange rate strengthened on Wednesday as the Dollar was hobbled by a US government shutdown and some underwhelming data releases.

At the time of writing, GBP/USD was trading at approximately $1.3521, up roughly 0.6% from the start of Wednesday’s session.

The US Dollar (USD) weakened through Wednesday’s European session, coming under sustained pressure amid renewed political and economic concerns.

In early trade, the ‘Greenback’ was undermined by market jitters surrounding the US government shutdown, which dampened investor confidence in the currency.

Losses deepened later in the day following the release of disappointing US data.

September’s ADP employment change slumped sharply, dropping from -3k to -32k, in stark contrast to forecasts of a 50k increase.

Meanwhile, although the ISM manufacturing PMI exceeded expectations, the index remained below the 50-point threshold, signalling continued contraction in the sector.

Together, the data compounded selling pressure on USD, leaving the currency broadly weaker by the close of mid-week trade.

The Pound (GBP) traded in a relatively steady fashion against most of its peers during Wednesday’s European session, despite the release of underwhelming domestic data.

The UK’s latest manufacturing PMI for September, while less closely watched than the services index, remained an important gauge of industrial performance.

The reading fell from 47.0 to 46.2, extending deeper into contraction territory, though it broadly aligned with market expectations.

Even with the weaker data, GBP held its ground, supported by a generally upbeat market mood, as the day’s risk-on sentiment helped the increasingly risk-sensitive Sterling maintain stability throughout Wednesday’s trading session.

GBP/USD Forecasts: US Shutdown to Fuel Fresh Volatility?

Looking ahead to Thursday’s European session, the GBP/USD exchange rate may continue to find support as investor focus remains on the ongoing US government shutdown.

With the closure disrupting scheduled economic publications, key releases such as the latest initial jobless claims and factory orders will not be published.

The absence of this data could keep the ‘Greenback’ under pressure, as uncertainty over the political situation in the US weighs on sentiment.

On the UK side, no major domestic releases are due on Thursday’s calendar.

As a result, Sterling may lack fresh direction of its own, leaving GBP exchange rates vulnerable to shifts in broader market sentiment and external developments.

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USD/JPY Technical Analysis

The US dollar initially tried to rally, only to fall apart against the Japanese yen during the trading session here on Wednesday, as it looks like we’re probably going to try to grind back down to the bottom of the overall consolidation. That means we could go down to the 146 yen level. That’s an area that’s been on a massive floor in the market. So, it’ll be very important and very interesting to watch. So, if we drop there and bounce, I think that is an extraordinarily good sign. If we turn it around and rally at this point, 149 yen probably will be the target.

AUD/USD Technical Analysis

The Australian dollar initially did fall against the US dollar, but then turned around to show signs of light at the top of the rectangle that we had been in previously. So, the 0.66 level looks like it is, in fact, trying to offer a bit of support based on market memory. We’ll wait and see how that plays out. But if we break down from here, then I’d be watching the 0.6550 level.

The 50 day EMA is right there as well. So, I think there is a floor in this market. If we can rally from here, the 0.67 level would be a bit of a target. We have been in an uptrend for quite some time. So, despite the fact that this has been a very lackluster move to the upside, the reality is that it’s been more of a grind. So, I’m not looking for explosive moves.

For a look at all of today’s economic events, check out our economic calendar.

The US dollar faced renewed pressure this week, while the Japanese yen emerged as one of the strongest performers in the foreign exchange market. The decline in US bond yields and falling oil prices are typically beneficial for energy-importing countries like Japan, providing support to the yen. However, the real driving factor was the US government shutdown. With no signs of a quick resolution, markets are bracing for a prolonged standoff, which could weaken consumer confidence and exacerbate concerns over job security. As a result, the USD/JPY pair is likely to remain slightly bearish in the near term.

The US dollar is under dual pressure from political and data risks.

As traders focus on the US government’s budget impasse, the dollar has continued its steady decline. Although the government shutdown was anticipated, it still had tangible impacts, most notably the delay in the release of key labor market data. With the Federal Reserve currently ‘flying blind’ on employment data, any attempts at a short-term rebound in the dollar are likely to be fleeting.

Expectations for interest rates have shifted, with markets now anticipating approximately two rate cuts by the Fed before the end of the year, and cumulative cuts exceeding 100 basis points by 2026. This adjustment reflects both recent robust data and lingering concerns about the labor market. Should forthcoming data disappoint, downside risks for the dollar will remain significant.

Data release schedules disrupted.

Although the ADP private employment data and ISM Manufacturing Index may still be released today, the weekly initial jobless claims and September nonfarm payroll data are likely to be postponed. The ADP employment report showed a decrease of 32,000 jobs, below the expected increase of 50,000, creating a bearish sentiment for the dollar.

The ISM Manufacturing Index is expected to come in slightly below 50.0. Earlier this week, softening consumer confidence figures and a weak Chicago Purchasing Managers’ Index (PMI) added further pressure on the dollar, underscoring the fragility of current market sentiment.

The yen is gradually gaining upward momentum.

The yen is becoming the clearest beneficiary of the current market turmoil. The USD/JPY exchange rate has broken below the 147.00 level, and with neither the Democratic nor Republican parties showing willingness to compromise, this deadlock may persist. If the impasse drags on, layoffs and distorted employment data could further dampen market sentiment, reinforcing the bearish outlook for USD/JPY.

Aside from U.S. political factors, the overall market environment is also favorable for the yen. Currency pairs such as GBP/JPY and CAD/JPY are under pressure; meanwhile, the Bank of Japan has signaled a gradual shift toward tighter monetary policy, while the Federal Reserve moves toward rate cuts, with narrowing interest rate differentials likely to continue supporting the yen.

USD/JPY Forecast: Technical Outlook

(USD/JPY Daily Chart Source: Easy Forex)

From a technical perspective, after a volatile summer, the USD/JPY forecast has turned bearish. The bears have broken through the recent low around 147.50, triggering stop-loss selling, and breached the initial downside target at 147.00. If the USD/JPY exchange rate continues to trade below 147.50, it may further decline in the short term, potentially testing 146.30, 146.00, and possibly even reaching 145.00.

On the upside, the immediate resistance level is located at 147.50, followed by the 148.50–148.65 range, with the key psychological threshold of 150.00 positioned higher.

At 21:29 Beijing Time, USD/JPY was trading at 146.735/743, down 0.72%.