June 15, 2025 – Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: 40-Month Best, but “Room for Downside Correction”

The Pound to Dollar exchange rate (GBP/USD) jumped to a 40-month high just above 1.3630 late on Thursday as the dollar came under further pressure.

There was, however, a sharp retreat to lows near 1.3520 on Friday following Israel’s military strike on Iranian nuclear facilities before trading just below 1.3550.

There was renewed demand for safe-haven assets while the slide in risk appetite undermined the Pound in global markets.

According to ING, GBP/USD may be able to avoid sustained losses; “Cable has potentially a wide room for downside correction given how expensive it looks relative to rate differentials. But we have seen how structurally bearish USD bets are preventing dollar gains from being sustainable. So, we’d be more cautious on that side.”

UoB commented; “The likelihood of GBP closing above 1.3640 will remain intact as long as 1.3515 is not breached. Looking ahead, should GBP close above 1.3640, the focus will shift to 1.3700.”

A break below 1.3500 – 1.3515 would suggest a sharper correction.

MUFG noted the shift in trading dynamics; “In the FX market the initial response has been a flight to safety which has benefitted the Swiss franc, yen and US dollar.”

Commerzbank currency strategist Michael Pfister expects caution will prevail in the short term; “Until the danger of further escalation has passed, safe assets are likely to remain in demand.”

Danske Bank added; “The attack adds significant uncertainty to diplomacy, with US officials denying direct involvement while cautioning that it could either hinder or, unexpectedly, pressure Iran towards discussions.”

MUFG commented; “Market participants will now be watching closely to see how the conflict develops and whether it will have an actual disruptive impact on global supply chains including importantly the supply of oil.”

Rabobank discussed the potential implications; “the war between Israel and Iran, the likely involvement of the US and the possible involvement of other countries in the region, will take center stage today and in the coming days. Which scenario is going to develop?”

According to the bank; “The best-case scenario, which markets seem to be pricing in, is a short and fast operation that will deliver Israel and the US a major geopolitical victory. However, in terms of probability of this scenario unfolding, how easy is it is to take out an entire country with a relatively strong military in 24-48 hours?”

It added; “There are several escalation scenarios. The worst case is a long, drawn-out war that spreads to Hormuz and/or Saudi/UAE, and to global sites via proxies.”

The Pound is also liable to be hampered by reservations over the domestic economy and speculation over more dovish Bank of England guidance at next week’s policy meeting.

Danske Bank noted the weaker than expected GDP data released on Thursday; “The data yesterday follows weaker than expected labour market data out earlier this week and highlights that the UK economy is experiencing more underlying weakness following a strong start to the year.”

There are still doubts whether the dollar can gain sustained support.

Scotiabank commented; “The relative loss of investor appetite for U.S. assets is increasingly becoming a forecasting issue. Concerns about U.S. fiscal plan(s) have led to a rise in U.S. borrowing costs that have spread to other markets.”

Traders are also still very wary over tariff developments. President Trump stated that higher tariffs would be extended to domestic appliances.

According to ABN Amro; “The overall impact on the economy would not be favorable, and the repercussions for financial markets could be significantly worse. This reputational damage has arguably been a major factor driving the dollar’s devaluation in recent months.

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TAGS: Currency Predictions Pound Dollar Forecasts