Modified: Tuesday, 6 January 2026 08:16 BST

– Written by


David Woodsmith

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD “Neutral” as Markets Turn Cautious

The Pound to US Dollar exchange rate (GBP/USD) eased back from recent highs on Monday as rising geopolitical tensions encouraged investors to favour traditional safe-haven assets.

At the time of writing, GBP/USD was trading near $1.3461, little changed from the start of the session.

The US Dollar (USD) found modest support at the beginning of the week as investor caution increased following developments in Venezuela over the weekend.

Reports of US military action in Caracas and the detention of Venezuelan President Nicolás Maduro and his wife, Cilia Flores, prompted a shift toward more defensive positioning in early trade.

While the immediate reaction across currency markets was relatively muted, investors remain alert to the risk of further escalation, which could drive volatility if broader geopolitical consequences begin to unfold.

There are also concerns that President Donald Trump’s hardline approach to regime change in Venezuela could set a wider precedent, potentially increasing instability elsewhere and reinforcing demand for safe-haven currencies such as the US Dollar.

That said, gains in USD were capped by ongoing expectations that the Federal Reserve will continue easing monetary policy through 2026.

The Pound (GBP) held its ground on Monday, trading within a narrow range after comments from Prime Minister Keir Starmer hinted at a more conciliatory approach toward post-Brexit relations with the European Union.

In an interview with the BBC, Starmer suggested that closer alignment with the EU single market could be pursued where it benefits the UK, while stopping short of endorsing a full customs union.

Markets interpreted the remarks as signalling a more pragmatic trade strategy in the year ahead, with improved EU relations seen by many investors as a potential positive for UK growth and investment prospects.

GBP/USD Outlook: Geopolitical Risks to Keep Markets on Edge?

Looking ahead, movement in the Pound to US Dollar exchange rate is likely to remain uneven as investors continue to monitor developments in Latin America and assess the risk of further US intervention.

Speculation around possible escalation involving Venezuela — or indications of action in neighbouring countries — could sustain demand for the US Dollar via heightened risk aversion.

In the UK, attention will also turn to the final services PMI for December, due on Tuesday. A downward revision could weigh on Sterling, particularly if it mirrors last month’s disappointing manufacturing data and reinforces concerns over the UK’s growth outlook.

According to FX analysts at Scotiabank, “The pound is up a fractional 0.1% vs. the USD and outperforming all of the G10 currencies with the exception of JPY.

“Domestic releases have been limited to second-tier credit/lending data, suggesting that the pound’s resilience is likely being driven by flows related to geopolitics and reflects the market’s assessment of the strength of the US/UK relationship.

“Risk reversals are little changed, offering little in terms of sentiment-driven movement.

“We are neutral awaiting a break of the two week range roughly bound between 1.34 and the mid1.35s.”

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TAGS: Pound Dollar Forecasts