March 13, 2025 – Written by Tim Boyer

STORY LINK GBP/USD Forecast: Pound Sterling Unable to Break 1.30 – Where Next?

The Pound to Dollar exchange rate (GBP/USD) peaked at 4-month highs just below 1.2990 on Wednesday before a retreat to near 1.2950.

Huge global influences of trade wars and the Ukraine situation will remain crucial for markets with stock market trends also watched very closely.

Markets will also have to factor in the possibility of a US government shutdown given that Senate Democrats are threatening to block the Republican budget resolution.

According to ING; “we retain a bearish bias on GBP/USD, although near-term noise linked to the US macro outlook might still bring the pair temporarily above 1.3000.”

Domestic factors will come into greater focus, especially if there is greater evidence of vulnerability.

The RICS housing index dipped to 11 for February from a revised 21 previously, below consensus forecasts of 20 and a 4-month low.

The indicator of new buyer enquiries also slipped to the lowest level since November 2023.

RICS Chief Economist Simon Rubinson commented; “The UK housing market appears to be losing some momentum as the expiry of the temporary increase in stamp duty thresholds approaches. Some concerns are also being expressed by respondents about the re-emergence of inflationary pressures and the more uncertain geopolitical environment.”

He was still broadly optimistic over the outlook; “That said, looking beyond the next few months, sales activity is seen as likely to resume an upward trend with prices also moving higher.”

The latest UK GDP data will be released on Friday. Consensus forecasts are for 0.1% growth for January after a 0.4% increase previously.

Any monthly contraction in GDP for the month would trigger fresh selling pressure on the Pound.

Monetary and fiscal policy will come into greater focus with the latest Bank of England policy decision on March 20th and budget on March 26th.

The government is likely to announce medium-term departmental spending cuts given the erosion of fiscal headroom.

ING commented; “We still look with some concern at the upcoming 26 March Budget event in the UK, which runs the risk of unnerving a gilt market already hit by EU-bond spillover. We see downside risks for sterling ahead of the risk event.”

Globally, there has been some relief for equity markets with US markets able to secure tentative gains and the FTSE 100 index opening higher on Thursday.

Overall sentiment remains fragile, especially with unease over an escalation in trade wars.

If US markets decline and European markets are resilient, the dollar will tend to weaken. If all markets come under pressure, the US currency could benefit.

According to ING; “the key is whether more equity declines are a US-only matter or followed by European stocks. Futures point to the latter today, so the dollar may not face much idiosyncratic pressure.”

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TAGS: Pound Dollar Forecasts