– Written by


Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Regains 1.35 vs USD on Fed Cut Expectations

The British Pound (GBP) moved higher against the US Dollar (USD) on Tuesday, with cable’s exchange rate regaining the 1.3500 level after briefly dipping lower on weak UK data.

Expectations of further Federal Reserve rate cuts kept the dollar on the defensive, while firmer equity markets also lent the Pound support. UK services PMI weakness limited upside, however, with investors cautious over whether higher yields will bolster sterling or reignite fiscal concerns.

GBP/USD Forecasts: Regains 1.3500

The Pound to Dollar (GBP/USD) exchange rate dipped below 1.3500 after disappointing UK data on Tuesday, but regained losses to trade around 1.3520 after the US open.

Expectations of further Federal Reserve rate cuts this year were key in underpinning the Pound as the dollar overall had a softer tone in global markets while the Pound drew support from net gains in equities.

A crucial factor will be whether relatively high yields support the Pound or lead to increased fiscal fears.

According to UoB; “GBP may edge higher today, but any rise is likely part of a higher range of 1.3480/1.3545. A sustained break above 1.3545 appears unlikely.”

Scotiabank also expects further near-term consolidation; “We await a break of the multi-month range centred around 1.35 and look to a near-term range bound between 1.3450 and 1.3550.”

Crucial long-term resistance remains near 1.3800.

UK business confidence data was weaker than expected with a significant slowdown in the services-sector index to a 2-month low of 51.9 from 54.2 previously which triggered fresh doubts surrounding the UK growth outlook.

There were, however, relatively hawkish comments from BoE chief economist Pill who defended his call for bond sales to be maintained at the current pace while also noting that inflation had been more stubborn than expected.

The US PMI manufacturing index retreated to a 2-month low of 52.0 for September from 53.0 previously and fractionally below consensus forecasts while the services-sector index also declined marginally to a 3-month low of 53.9 from 54.5.

There was further strong upward pressure on costs with the second-highest increase in services-sector costs for 27 months, but strong competition and weak demand curbed price increases.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented on mixed data; “While growth expectations across both manufacturing and services also continue to be dogged by concerns over the political environment, and especially tariffs, September encouragingly saw business sentiment improve in part due to the anticipated beneficial impact of lower interest rates.”

In this context, Fed rhetoric will continue to be monitored closely. Fed Governor Bowman stated that she was worried that the Fed was behind the curve on labour-market weakness and the central bank may need to adjust faster if risks materialise.

Overall, she expects a further two rate cuts this year.

Scotiabank commented; “Markets have repriced Fed easing risks away from the extremes seen running into last week’s FOMC but continue to reflect the expectation that the Fed still has a lot more easing ahead, with swaps and futures implying the Fed Funds target rate falling to 3.00% over the next 12 months or so.”

It added; “While markets are relatively subdued, DXY price action looks a little soft.”

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TAGS: Pound Dollar Forecasts

In relatively calm Asian trading, the USD/JPY pair is hovering around 147.95 after retreating to 147.60— a decline that was less surprising than it was a reflection of the intersection between two opposing monetary policy paths in the United States and Japan.

On the one hand, the U.S. Federal Reserve, led by Jerome Powell, sent clear signals that the slowdown in the labour market has become a higher priority than persistent inflation, which was reflected in a rate cut last week.

However, Powell stated yesterday that there might not be further cuts in 2025, stressing that the Fed will rely on data to determine the course of monetary policy on a meeting-by-meeting basis.

On the other hand, the Bank of Japan stands on the brink of decisions that could mark a shift away from its ultra-loose stance, but the political uncertainty in Tokyo is limiting the yen’s ability to capitalize on such expectations. This paradox explains the recent choppy moves in the pair.

In my view, what we are witnessing today is not merely a short-term move within a narrow range, but rather the start of a new balance in the FX market that could last for weeks. The dollar’s trajectory is driven not only by the Fed’s rate cut but also by simultaneous declines in U.S. business activity indicators. The latest PMI data point to slowing momentum across both manufacturing and services, reducing the dollar’s attractiveness as a short-term haven. Investors are increasingly concerned that the economic downturn is outpacing the Fed’s steps, which clouds expectations for monetary easing and creates significant volatility.

That said, I cannot overlook the fact that the dollar still retains relative strength compared to other currencies, especially amid persistent global economic uncertainty. The U.S. Dollar Index, despite a slight dip, remains supported above 97, reflecting that markets have not yet abandoned their underlying confidence in the greenback. In my opinion, any additional downside in USD/JPY is likely to encounter strong support before 146.50, particularly if U.S. new home sales data beats expectations, which could restore some balance to the economic outlook.

On the Japanese side, the picture is more complex. While expectations of a rate hike by the Bank of Japan in October are growing, it is difficult to build a solid case based on these forecasts alone. The sudden resignation of Prime Minister Shigeru Ishiba has opened the door to a politically unstable phase, with the Liberal Democratic Party’s leadership election on October 4 potentially reshaping the outlook altogether. From my perspective, when reading the impact of politics on markets, the yen tends to react quickly to domestic political uncertainty, especially when linked to concerns about the central bank’s independence or resolve. Thus, any strength in the yen derived from rate hike expectations could quickly erode if a dovish-leaning candidate secures leadership.

What is interesting here is that markets are now pricing in dual probabilities: on one side, a nearly 90% chance of further Fed easing in October, and on the other, more than a 50% chance of a BoJ hike. This divergence places USD/JPY in a highly sensitive zone, where a sharp move could occur if either of these scenarios becomes clearer. In my opinion, the most likely outcome is continued relative weakness in the dollar versus the yen, but not as sharply as some investors anticipate. A clear break below 147 would require a fresh negative shock from U.S. data or a more hawkish tilt from the BoJ.

Additionally, the market’s behaviour during Japan’s Autumn Equinox holiday is worth noting. Thin volumes in Asian hours created room for sharper swings in European and U.S. sessions, fuelled by cautious remarks from Fed officials like Austan Goolsbee. In my view, this “data-watching” phase will remain a dominant feature of markets over the next two weeks. Investors are not yet building long-term positions, but are instead seeking short-term opportunities amid a lack of a clear trend—leaving the pair highly sensitive to any surprises.

Looking at the medium term, I believe the scenario of “gradual convergence” between Fed and BoJ policies will remain the decisive factor. If the Fed continues with gradual cuts while the BoJ takes even one step toward tightening, we may see a shift in the balance of power favouring the yen, albeit modestly. However, Japan’s political factor cannot be ignored, as new leadership might delay any tightening if growth is deemed too fragile to withstand higher rates.

Ultimately, I see USD/JPY standing at a strategic crossroads. The current moves around 147.50 are not just noise, but reflect a broad repricing of monetary policy expectations in the world’s two largest economies. My base case is for the pair to remain in the 146.50–149.00 range in the coming weeks, with a bearish bias conditioned on weaker U.S. data and a stable Japanese political backdrop. Should the LDP elections produce unexpected results, however, we could see a wider move toward 145—a scenario I do not rule out, though it would require the rare alignment of politics and economics. From my experience, markets rarely offer such alignment, but they punish harshly those who fail to consider its possibility.

Technical analysis of ( USDJPY ) prices

The four-hour chart of the USD/JPY pair shows clear volatility within narrow support and resistance ranges, with the price currently trading near 147.94 after hitting the key resistance area known as the “Golden Zone” multiple times. This zone corresponds to the 0.66–0.78 Fibonacci levels, making it a strong barrier against any further upward movement. Continued trading below this area reflects underlying selling pressure that could drive the pair to retest lower levels

Created on September 24, 2025

• The euro initially dipped against the Japanese yen during the trading session on Tuesday but then turned around to show signs of life. The ¥175 level is an area that could offer a bit of resistance, and it does look like we are trying to get above it.
• If we can break the ¥175 level, then the market is likely to go looking to the ¥175.50 level. Short-term pullbacks I think make a nice buying opportunity as we have just broken above a massive ascending triangle.

Ascending triangle

The ascending triangle signals a potential run to the ¥178 level based on the “measured move”, but at this point in time, it’s also worth noting that the uptrend line at the bottom of the ascending triangle offer support, with the 50 Day EMA backing that up as well. The ascending triangle is the most obvious signal that I see on this chart, but it should be noted that we have been bullish for some time anyway, so this is just more confirmation.

The interest rate differential of course is starting to offer an attractive “buy-and-hold” type of situation. All things being equal, this is a market that every time it drops, buyers will almost certainly be interested in buying, especially if there is any type of risk appetite out there. The risk appetite of course favors this pair going higher if people are willing to put a little bit of risk on the table, but it also favors this pair going lower if people are a bit concerned as the Japanese yen is considered to be a massive “safety currency.”

On a breakdown from here, believe that the ¥170 level should be a major “floor in the market”, and if for some reason we were to break down below that level, then the euro could go plunging against the Japanese yen and I would expect that the Japanese yen would probably be strengthening against most other currencies in that environment as well.

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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.

– Written by


David Woodsmith

STORY LINK British Pound to Dollar Forecast: GBP Struggles to Rebound Against Firm USD

The Pound to US Dollar (GBP/USD) exchange rate was muted on Tuesday as Sterling struggled to gain traction after weaker-than-expected UK PMI data.

At the time of writing, GBP/USD was trading at around $1.3501, virtually unchanged from the start of the session.

The Pound (GBP) slipped in the wake of September’s flash PMIs, which revealed disappointing results across both the manufacturing and services sectors.

The manufacturing index dropped from 47.0 to 46.2, moving deeper into contraction, while the services PMI fell from 54.2 to 51.9, missing forecasts for a softer decline to 53.5.

As the services sector accounts for the bulk of UK economic activity, the sharp slowdown to a four-month low weighed heavily on sentiment.

Analysts pointed to subdued client confidence and lingering political and economic uncertainty as key drags, leaving Sterling struggling for support through the session.

The US Dollar (USD), meanwhile, traded steadily against most major peers. Investors largely held positions ahead of further commentary from the Federal Reserve.

On Monday, new policymaker Stephen Miran had argued that US interest rates remain around 200 basis points too high, putting some mild pressure on the Greenback.

On Tuesday, attention shifted to Fed Chair Jerome Powell’s upcoming speech, with traders bracing for any dovish signals that could spark renewed Dollar selling.

GBP/USD Forecasts: Central Bank Commentary in Focus

Looking ahead to Wednesday, GBP/USD is likely to take direction from a slate of speeches by Federal Reserve and Bank of England officials.

With no major data scheduled, markets will be watching closely for any policy hints that could reshape interest rate expectations on either side of the Atlantic.

Beyond central bank commentary, broader risk appetite may also steer price action.

A shift towards risk-on sentiment could lend the Pound fresh support, while a more cautious market tone would likely see GBP/USD remain under pressure.

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• The GBP/USD forecast remains subdued as UK PMI data signals slowing growth.
• Fiscal deterioration and rising gilt yields weigh heavily on Sterling sentiment.
• The Fed’s hawkish tilt offsets the recent rate cut, supporting the dollar against the GBP.

The British pound came under renewed selling pressure on Tuesday after the UK PMI for September came in downbeat. The Composite PMI slipped to 51.0 against the expected 52.7 and previous 53.5. It suggests that business activity continues to expand, albeit at a slower pace. The manufacturing PMI showed a deeper contraction, falling to 46.2, below the consensus of 47.0, while services cooled to 51.9 from 54.2.

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Chief Economist at S&P Global Market Intelligence, Chris Williamson, flagged a litany of concerning news, including weak overseas demand, rising job losses, and declining business confidence. The slowdown comes against the backdrop of a strained UK fiscal outlook.

The UK public finances further declined in August as borrowing rose to £18 billion, the highest level in five years. Cumulative borrowing in the current fiscal year already exceeds official forecasts, leading to higher gilt yields. Markets are now bracing for Rachel Reeve’s autumn budget in November, which could signal fiscal tightening or more spending pressure.

Meanwhile, the Bank of England kept interest rates unchanged at 4.0% last week and reiterated its gradual approach to easing amid stubborn inflation above 2%. The fear of stagflation also persists as growth stagnates while inflation lingers higher.

On the US side, the Federal Reserve delivered its first rate cut in 2025. Still, Fed Chair Powell struck a hawkish tone, warning of weakness in the labor market while emphasizing the Fed’s commitment to controlling inflation. The retail sales data and jobless claims reinforced US growth momentum.

The combination of a hawkish Fed and a fragile UK fiscal situation is weighing on the GBP/USD, which is currently consolidating at 1.3500 after falling to the 1.3450 area last week.

Key Events Ahead

• US PMIs: The US PMIs could weigh on the pair as the data is important for the Fed to gauge economic sentiment.
• Jerome Powell’s speech: Markets await fresh guidance from the Fed Chair on future rate cuts and labor market conditions.
• Comments from Fed officials: Michele Bowman, Raphael Bostic, Stephen Miran, and Beth Hammack may shape near-term USD expectations.
• UK Autumn Budget (November): Investors will watch whether Chancellor Reeves signals fiscal tightening or additional borrowing.
• Upcoming UK data: Inflation, retail sales, and consumer confidence figures will be key in shaping BoE policy expectations.

GBP/USD technical forecast: Key MAs to set trend

The GBP/USD price wobbles around the key MAs around 1.3500 on the 4-hour chart. A sustained breakout of the 200-period MA could ignite a selling momentum leading to a deeper correction. The RSI is now out of the oversold region but remains below the 50.0 mark, indicating a prevailing weakness.

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The immediate support appears at 1.3500 ahead of the previous week’s lows of 1.3450 and then 1.3400. On the upside, 1.3550 remains the immediate target for the bulls ahead of 1.3600.

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