– Written by


Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Advances as Fed Dovish Shift Hits USD

The Pound to Dollar exchange rate (GBP/USD) advanced to a one-week high near 1.3440, taking advantage of a broad dollar retreat as traders priced in two Fed rate cuts by the end of 2025.

Foreign exchange strategists, however, remain wary of UK economic fragility and limited BoE flexibility.

GBP/USD Forecasts: Rebounds to 1-Week Highs

Pound Sterling secured a net advance on Tuesday, able to take advantage of a dollar setback to make net gains to a 1-week high of 1.3440 in Europe on Thursday.

According to UoB, further gains are likely to be limited; “The major resistance at 1.3475 is unlikely to come into view. To keep the mild momentum going, GBP must hold above 1.3360.”

The Pound also still has work to do to regain a firmer trend.

ING, for example, expects GBP/USD will be capped below 1.40 throughout the next 12 months.

Markets remain very confident that the Fed will cut interest rates this month and are now pricing in close to a 95% chance of two rate cuts by the end of 2025.

The US 10-year yield has dipped to near 4.00% with the prospect for lower interest rates undermining the dollar.

ABN Amro, however, is not convinced over the merits of further rate cuts; “We think policy is currently not as restrictive as the FOMC appears to think, and we think the upside risks to inflation outweigh the downside risks to the labour market. This frontloaded easing path increases the probability of the upside inflation risks materializing.”

Markets are also fretting over trade developments as US-China tensions continue to intensify.

Overnight, President Trump stated that the US is in a trade war with China.

ING commented; “The question for financial markets is whether China’s proposed export controls on rare earths are merely part of a bargaining ploy to achieve greater concessions from the US. Or really whether it is a threat which would stick and greatly disrupt global supply chains.”

The aggressive rhetoric has increased concerns over a further hit to the US economy and hurt the dollar.

It is, however, unlikely that the Pound would find strong support if global risk appetite deteriorates sharply.

As far as the UK economy is concerned, GDP increased 0.1% for August, in line with expectations, but the July figure was revised down to –0.1% compared with the flash figure of no change.

Capital Economics deputy chief UK economist Ruth Gregory maintains a generally downbeat stance; “The meagre rise in real GDP in August suggests growth is still being hampered by high interest rates, higher taxes and soft overseas activity. With business sentiment on the floor and employment still falling, we doubt growth will improve much in Q4.”

The implications for interest rates and taxes will be important.

Gregory does not expect a shift within the Bank of England; “With inflation still high and rising, we doubt the soft GDP news will tempt the Bank of England to cut interest rates again this year.”

She expects the next rate cut will be in February.

The UK goods trade deficit widened to £21.1bn for August from £20.65bn the previous month. Exports declined £1.1bn on the month with a £0.7bn decline in exports to the US, illustrating the stresses caused by tariffs.

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TAGS: Pound Dollar Forecasts

The GBPJPY pair still needs positive momentum until this moment, which forces it to form sideways fluctuated moves by its stability near 201.70 support level, which represents the key of detecting the expected trend in the near trading, as its stability makes us expect motivating the bullish trend, which might target 202.55 level reaching 203.85 barrier.

While breaking the current support and providing negative close below it will force it to activate the bearish correctional track, which forces it to suffer extra losses by reaching 201.10, reaching the next support at 200.45.

The expected trading range for today is between 201.70 and 203.00

Trend forecast: Bullish

The EURJPY pair forced it to form slow sideways trading, to face stochastic negativity which keeps its positive stability above the extra support at 175.20 level, confirming the continuation of the suggested bullish attempts.

Gathering the positive momentum is important to ease the mission of forming bullish waves, to help it surpass the obstacle at 176.40, then targeting the next positive station at 177.05, while breaking the current support will force it to activate the bearish corrective trend, to suffer extra losses by reaching 174.25.

The expected trading range for today is between 175.20 and 176.45

Trend forecast: Bullish

Created on October 17, 2025

• The British pound rallied during the trading session on Thursday to reach the crucial 50 Day EMA indicator.
• That being said, we have given back some of the gains and it looks like the US dollar might come back into favor.
• With that being the case, I could see this market pulling back a bit, but I also recognize that the British pound has been stronger against the US dollar than many other currencies, and with that being the case I think you have to look at this through the prism of a market that is just simply trying to sort itself out.

US Dollar Strength

Even if the US dollar strengthens quite significantly, it will continue to struggle a bit against the British pound, due to the relative strength of this currency against many others out there. Ultimately, this pair starts to fall apart, it’s more likely than not that other currency such as the Euro or the Canadian dollar will get absolutely crushed.

Technical Analysis

Keep in mind that the technical analysis for this market is somewhat sideways, as we are sitting between the 50 Day EMA and the 200 Day EMA indicators, and it’s also worth noting that we are at the 1.34 level, which is the middle of the overall consolidation range that we have been in between the 1.32 level on the bottom, and the 1.36 level on the top. As we are in the middle of this range, then it makes quite a bit of sense that we could look at the market as being “near fair value.”

Ultimately, the US dollar has been fighting most other currencies, and I think that will remain the same situation here. With the market being this noisy as it is, I think fading signs of exhaustion will more likely than not end up being selling opportunities, but you need to watch the US dollar against multiple other currencies, to get an idea as to how the US dollar may behave in general. If we do break above the 50 Day EMA and perhaps the 1.35 level, then it’s likely that we could go looking to the 1.36 level after that.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Created on October 17, 2025

• The US dollar has fallen a bit against the Japanese yen and now it looks like we are starting to see buyers jump back into the market.
• This is a pair that I remain bullish about, and I think we’re starting to show signs of maybe being able to get involved in this market.
• After all, traders will try to find some excuse to take advantage of that positive swap.

That being said, the 150 yen level is where the 50 % Fibonacci retracement level is on the move that we have seen recently. Or you could even look at the gap and see that we tested the 50 % Fibonacci retracement level from the actual gap itself. It does make sense that people will be willing to get involved and try to reach the 153 yen level. This is a market that often sees these little pullbacks in short order, but the interest rate differential continues to favor the US dollar.

I Still Remain Bullish

All things being equal, this is a market that I think given enough time, this is a pair that goes much higher. And with that being the case, I have to look at potential targets, and I will base it on and granted this is a huge look here at technical analysis, but we did break out of an ascending triangle, which basically measures for a move to about 162 or so, which is where we broke down from in July of 2024. I think that might be where we’re going.

The interest rate differential and of course the soft Japanese central bank will continue to push this thing higher, and unless we get some type of major risk-off event, which is always entirely impossible, I think the Japanese Yen remains on its back foot for quite some time.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.