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July 21, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Forecast for Coming Week: Diverging FX Predictions

The Pound to Dollar exchange rate (GBP/USD) faces diverging forecasts, with BNP Paribas targeting a rise to 1.42 by end-2026, while ING sees limited upside amid UK fiscal concerns and a slower Bank of England easing cycle; broader USD weakness may support Sterling, but political risk and Fed uncertainty keep short-term volatility high.

BNP Paribas forecasts that the Pound to Dollar rate will strengthen to 1.38 by the end of 2025 with a further advance to 1.42 by the end of next year.

ING forecasts that GBP/USD will be held to 1.34 on a 12-month view.

GBP/USD dipped to 8-week lows below 1.34 during the week before recovering slightly.

JP Morgan expressed concerns over the technical outlook with GBP/USD key trend support at 1.3376-1.3497.

Looking at the risk of a break it commented; “were to occur this summer. We see the 1.319-1.3148 area as the first medium-term support zone for the pair.”

UK data was mixed during the week, but did dampen expectations of a more aggressive Bank of England (BoE) series of rate cuts.

The headline inflation rate increased to 3.6% from 3.4% with an increase in the core rate to 3.7% from 3.5%.

The latest labour-market data reported a provisional 41,000 decline in payrolls for June, but the May decline was revised to 25,000 from the 109,000 reported previously.

The data eased fears over a rapid deterioration in the jobs market.

Markets are still confident that the BoE will cut rates at the August meeting.

BNP commented; “We continue to hold the view that the GBP can benefit from USD weakness, although not as much as the EUR, which has more positive drivers. We therefore see the GBP performing around the middle of the pack of G10 currencies as the weaker USD trend continues.”

ING remains concerned over the fiscal outlook; “Sterling is starting to underperform a little. Fiscal policy is back in the headlines after the government failed to deliver spending cuts in welfare. Other spending cut options look limited, leaving the alternatives of tax hikes or a softening of the fiscal rules – neither of which look good for sterling.”

ING added; “We still look for the Bank of England to cut rates on a quarterly cycle. But a quicker deterioration in the labour market could see the BoE terminal rate priced some 25-50bp lower to the 3.00/3.25% area. This could see GBP/USD lag in an otherwise soft multi-quarter dollar environment.”

There was firm US data during the week with markets cutting expectations of a September rate cut to around 40%.

Credit Agricole commented; “We think the Fed would prefer to examine another couple of reports before determining a course of action, given that the labour market has held up okay heading into the July FOMC. A September cut remains our current base case, though such a move is far from certain.”

The dollar did, however, slide briefly following reports that President Trump was on the point of dismissing Fed Chair Powell, but recovered quickly when this was denied.

MUFG considers that the threat to Fed independence will remain a key risk factor; “the scope for any meaningful recovery of the dollar remains very limited in our view given these building efforts by the Trump administration to interfere and turn the Fed notably more dovish over time.”

Goldman Sachs expects the US economy will struggle; “A key underpinning to our bearish Dollar outlook is that US firms and households will pay for the majority of the tariffs, which will weigh on US relative performance. This, together with broader policy uncertainty, will lead investors to reduce their exposure to US Dollars.”

BNP remains bearish on the dollar; “We expect the secular USD downtrend to continue as global investors further reduce their overweight and under-hedged US asset exposure.

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• The USD/JPY forecast shows a resilient yen despite a shift in Japan’s political landscape.

• Japan’s ruling party lost the election on Sunday.

• If there is no trade deal by August 1, Japan might face a 25% tariff on its goods.

The USD/JPY forecast shows a resilient yen despite a shift in Japan’s political landscape. The currency edged higher against the dollar despite Japan’s ruling party losing majority seats in the Upper House. However, there is caution as market participants await the implications for the Prime Minister and US-Japan trade negotiations. 

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The yen strengthened on Monday after Japan’s ruling party lost the election on Sunday. Prime Minister Shigeru Ishiba’s party got 47 seats out of the 50 required to win a majority in the Upper House. This means that Ishiba has lost most of his power. Already, the ruling party has lost majority of seats in the Lower House. The new loss means a difficult time trying to pass policies. 

At the same time, it means uncertainty on trade talks with the US. If there is no trade deal by August 1, Japan might face a 25% tariff on its goods. Such an outcome would weigh on the economy and the yen.

USD/JPY key events today

Market participants do not expect any key economic releases from Japan or the US. Therefore, they will continue to monitor tariff developments.

USD/JPY technical forecast: Bearish RSI divergence

On the technical side, the USD/JPY price has broken below the 30-SMA, showing bears have taken the lead. The price now sits below the SMA, with the RSI under 50, supporting a bearish bias. However, the price is still facing the 148.02 key support level. At the same time, bears must break below the previous low to form a lower low and confirm a new downtrend. 

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Previously, the price was trading in a solid uptrend above the 30-SMA, making higher highs and lows. However, this stopped when bulls met the 149.01 resistance level. Here, they could not make a higher high. The price failed to break above the previous high, and the RSI made a bearish divergence. This allowed bears to push the price below the SMA. 

A break below 148.02 would confirm the shift in direction and clear the path to the 146.01 support level. However, if the price fails to break below the support level, bulls will likely return to retest the 149.01 resistance.

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July 21, 2025 – Written by David Woodsmith

STORY LINK Euro to Dollar Bank Forecast RAISED to 1.23 for Next 12 Months

The Euro to Dollar exchange rate (EUR/USD) is expected to strengthen over the coming year, with UBS raising its 12-month forecast to 1.23 amid shifting rate expectations, political risks for the Fed, and Eurozone fiscal momentum, though short-term volatility remains as markets digest firm US data and tariff threats.

UBS has raised its 12-month Euro to Dollar rate forecast to 1.23 from 1.20 previously.

ING expects EUR/USD will retreat to 1.15 on a 3-month view before a rebound to 1.18 in 12 months.

EUR/USD dipped to 3-week lows around 1.1560 during the week before a recovery to just above 1.1650.

US data releases were also generally firm with markets cutting the potential for a September rate cut to around 40%.

ING commented; “The dominant theme for this quarter we believe will be resurgent US inflation and a Fed resisting heavy political pressure to cut rates. This can deliver some brief respite to the dollar.”

It added; “But expect a lot of interest to buy the dip before EUR/USD rallies again into year-end on a 50bp Fed cut and Powell speculation.”

The dollar briefly slumped following reports that President Trump was poised to sack Fed Chair Powell, but rallied when these reports were denied.

Scotiabank Derek Holt VP & Head of Capital Markets Economics commented; “Personally, I think it’s all just a bunch of performative stunts by the administration.”

Deutsche Bank expects heavy dollar losses if Powell is removed; “we believe the market reaction would be large. It is stating the obvious that investors would likely interpret such an event as a direct affront to Fed independence putting the central bank under extreme institutional duress.”

UBS tied concerns in with unease over the budget deficit; “With US public debt set to rise firmly above 100% of GDP in the coming years, we see room for markets to demand a higher risk premium on US Treasuries. If the Fed provides a helping hand in managing the debt load—i.e., by reducing short-term rates or ramping up its balance sheet again—the USD would likely be hit hard.”

In this context, dollar fundamentals will also be a key element.

According to BNP; “We expect the secular USD downtrend to continue as global investors further reduce their overweight and under-hedged US asset exposure.”

It commented; “Data from European pension funds already highlights a significant increase in hedge ratios, and we suspect that this is a price-sensitive rotation whereby these ratios can rise further as the USD weakens.”

Trade developments will be important as the clock ticks towards the August 1st deadline with Trump threatening to impose 30% tariffs on the EU.

Barclays expects dollar resilience; “In the past few weeks there has been a gradual shift in the market’s reaction function, with the dollar now more resilient to tariff escalation news than post-Liberation Day.”

Barclays added; “the absence of widespread retaliation detracts from overt dollar bearishness. Combined with a hefty tariff schedule against the EU in particular and a markedly lower ECB rate path, this would make for a more challenging environment for the EUR.”

Goldman expects there would be renewed dollar selling; “If broad tariff rate hikes are implemented once again, we think the Dollar reaction would be negative again.”

UBS is positive on the Euro due to the election of a new German Chancellor and large fiscal package.

It also notes that the Euro is the most liquid alternative to the dollar while the Euro area has a positive net investment position.

It added; “In our view, all three drivers will remain in place in the coming months and quarters and are likely to push the euro higher against the USD—especially after the recent announcements of more front-loaded spending in Germany.”

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The GBPJPY pair witnessed fluctuated trading on its last intraday levels, after its decline due to the emergence of the negative signals on the (RSI), after reaching overbought levels, the price attempts to gain a bullish momentum that might assist it to recover and rise again, to lean on the EMA50, the fluctuated trading assisted it to rise, amid the dominance of the main bullish trend and its trading alongside a minor bias line on the short-term basis.

Therefore, our expectations suggest a rise of (GBPJPY) in its upcoming intraday trading, if the support settles at 198.75, to target the critical resistance level at 199.80, preparing to attack it.

The expected trading range for today is between 198.75 and 199.80

Trend forecast: Bullish