May 11, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Forecast: 1.45 if USD Reverts to Historic Mean

RBC Capital Markets (RBC) expects a tentative Pound to Dollar exchange rate (GBP/USD) gain to 1.39 by the second quarter of 2026 as the dollar loses ground.

If the dollar reverts to historic mean levels, Westpac notes that GBP/USD could reach 1.45.

Standard Chartered, however, expects a GBP/USD retreat to at least 1.30.

GBP/USD dipped to near 1.32 on Thursday amid a dollar recovery before a recovery to just above 1.33.

The UK signed a trade deal with the US with lower tariffs on steel and car exports to the US, although the baseline 10% tariffs were maintained.

The deal increased market hopes that the US Administration would adopt a more conciliatory stance towards trade tariffs.

In this context, the dollar secured a further net recovery amid a reduction in the risk premium with little net Pound benefit.

Looking at the UK implications, HSBC commented; “The trade deal does mean the UK avoids the worst of some of the US’s tariff hikes, but most UK goods still face the 10% tariff introduced by President Trump on 2 April. This is much more than the average tariff of 2.2% previously.”

Standard Chartered commented; “market optimism is likely to be short-lived since the UK parliament needs to approve and finalise the trade deal.”

There will be an important focus on China with some dialogue due over the weekend, but a lot of work to be done to make any progress.

MUFG commented; “A reduction for China even to 60% and others at a rate in between that and the 10% floor for all other countries is still more like worst case scenarios prior to 2nd April.”

It added; “Trump’s words yesterday may have indicated we are moving to a better place for global and US growth but his words also suggested trade uncertainty would remain high. That means, in our view, that there will be limits to this US dollar recovery with damage to the US economy likely to become more evident in US economic data.”

According to RBC Capital Markets the dollar will remain vulnerable; “Lingering trade uncertainty leaves the economic outlook still unknown, but it is clear asset markets price US assets with higher risk premia, higher volatility and higher uncertainty. So long as that stigma remains, we think USD selling through FX hedging or asset reallocation will remain the overall trend.”

The Federal Reserve held interest rates at 4.50%, in line with consensus forecasts. According to Chair Powell, the impact of tariffs will be greater than expected and there is likely to be upward pressure on both inflation and unemployment.

Higher unemployment would increase pressure for a cut in rates, but higher inflation would act in the opposite direction.

Given these potential tensions, Powell reiterated that the bank needed to be patient and wait for the data to signal the appropriate policy.

Markets cut the potential for a June rate cut to around 20% from near 60% previously.

The Bank of England (BoE) cut interest rates by 25 basis points to 4.25% which was in line with strong market expectations.

There was a 3-way vote split with Taylor and Dhingra voting for a larger 50 basis-point cut while Mann and chief economist Pill voted against cutting rates.

The bank maintained its guidance that interest rates should be careful and cautious given persistent inflation pressures.

HSBC is not backing another rate cut at the June meeting; “If all of the information is pointing in the same (dovish) direction, then it’s possible that the BoE will seek to speed up the pace of easing. But base case has to be for the next cut to come in August.”

Standard Chartered is more bearish; “we expect the Bank of England to cut rates more than other Developed Market central banks in the coming months as UK growth and inflation weaken due to global trade uncertainty.”

Westpac expects that GBP/USD will settled around 1.32 in June and rally to 1.36 by late 2026.

The bank added; “It is worth emphasising that there is clear upside risk to these forecasts if investors recoil from the US because of open-ended political and/or fiscal uncertainty. For Sterling, a full reset back to the 20-year average for DXY would equate to around 1.45.”

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TAGS: Currency Predictions Pound Dollar Forecasts

May 11, 2025 – Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: 1.17 by 2026, 1.24 by 2027 say RBC

RBC Capital Markets (RBC) forecasts that the Euro to Dollar exchange rate (EUR/USD) will strengthen to 1.17 at the end of this year with a further gain to 1.24 at the end of next year.

EUR/USD dipped to test 1.12 late in the week before a recovery to around 1.1265.

ING noted the importance of 1.12; “a break lower would signal a marked shift in sentiment on the pair and potentially pave the way for larger corrections, with 1.100 being the next big support.”

RBC sees three potential Euro supportive factors. An end to US exceptionalism would underpin the Euro, especially once the Fed does lower rates.

It also sees scope for increased capital flows to the Euro area with a Euro-Zone fiscal stimulus also supportive.

RBC commented; “We have revised up our end-2026 target for EUR/USD in line with a reassessment for allocation to US vs EZ assets.”

It added; “It is very hard calling the timing but we suspect we won’t see EUR/USD trade past 1.20 until the Fed is really able to narrow the s/t rate gap in 2026.”

The US-UK trade deal sparked optimism of a more conciliatory stance by the US Administration which underpinned the dollar.

UBS expects limited benefit; “We continue to view positive trade headlines as supportive for the USD. However, as we expect any dollar strength to be short-lived and anticipate the currency to weaken over the remainder of the year, we favor selling the USD during rallies—specifically below EURUSD 1.12.”

According to ING; “This is still a far cry from the “pragmatic” version of Trump that markets were pricing in as the baseline on Inauguration Day, but it’s enough to prevent growth and debt-related bearish bets on the dollar from mounting.”

The Federal Reserve held interest rates at 4.50% at the latest policy meeting, in line with consensus forecasts. According to Chair Powell, the impact of tariffs will be greater than expected and there is likely to be upward pressure on both inflation and unemployment.

Higher unemployment would increase pressure for a cut in rates, but elevated inflation would act in the opposite direction.

Given these potential tensions, Powell reiterated that the bank needed to be patient and wait for the data to signal the appropriate policy.

Markets cut the potential for a June rate cut to around 20% from near 60% previously.

ING commented; “This week, the Fed sounded anything but dovish. Still, there’s a risk that Chair Jerome Powell’s current stance is overly cautious given high uncertainty on tariffs – perhaps to reaffirm the Fed’s independence in the face of Trump’s easing calls.”

According to Danske Bank; “we still think risks are skewed towards downside surprises as front-loaded demand fades and goods supply shortages become increasingly common – especially if reaching an agreement on reducing China-tariffs takes longer than expected.”

It added; “We expect to see majority of the tariff-driven growth slowdown over the course of H2. So even if the Fed opts to remain on hold also in June, we remain confident in our call for three cuts in total for the rest of 2025.”

Westpac expects yields will remain dollar supportive; “We see the next Fed rate cut in September, meaning US rates will stay high compared to peers, including the European Central Bank (ECB), the Swiss National Bank (SNB) and the Bank of England (BoE), which have room to ease.”

Investment banks continued to debate the underlying dollar outlook.

According to Credit Agricole; “We doubt that the role of the USD as the world’s main reserve currency can be challenged any time soon given the lack of credible alternatives.”

It added; “Moreover, even if we were to see the emergences of global trade blocs using their own reserve currencies, the outcome could still favour the USD over the likes of the EUR.”

ING noted underlying uncertainty; “There are reasonable doubts about markets’ readiness to rebuild strategic dollar positions just yet, and time might be needed to reinstall market confidence in the dollar as a safe-haven asset.”

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TAGS: Currency Predictions Euro Dollar Forecasts

May 11, 2025 – Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: 1.182 Today, 1.2 by 2026

Foreign exchange analysts at Credit Agricole consider the Pound Sterling to be still undervalued and expect the Pound to Euro exchange rate (GBP/EUR) to gain to 1.2050 at the end of this year.

RBC Capital Markets (RBC), however, forecasts that the Pound to Euro (GBP/EUR) exchange rate will decline to 1.1630 at the end of this year with a further slide to 1.11 at the end of next year amid net capital inflows into the Euro area.

GBP/EUR secured a net gain to 5-week highs at 1.1820 during the week before settling around 1.18 amid positive UK trade developments and a relatively hawkish Bank of England (BoE) policy decision.

The Bank of England (BoE) cut interest rates by 25 basis points to 4.25% which was in line with strong market expectations.

There was a 3-way vote split with Taylor and Dhingra voting for a larger 50 basis-point cut while Mann and chief economist Pill voted against cutting rates.

The bank maintained its guidance that interest rates should be careful and cautious given persistent inflation pressures.

According to Rabobank; “Our baseline scenario remains unchanged since last summer: the MPC cuts rates quarterly, focusing on meetings with an MPR, and aims to close out 2025 with a policy rate of 3.75%.”

It added; “That said, we do agree with the market’s view prior to today’s meeting that the risk of a more aggressive pace has risen. But for that to materialize, April’s CPI print (out on May 21) must soothe rather than reignite fears of inflation’s persistence.”

Danske Bank noted positive yield spreads, but added; “More broadly, while we see domestic factors as GBP positives, we think the global investment environment will be in the driver’s seat for EUR/GBP in the coming months. An investment environment characterised by elevated uncertainty, widening credit spreads and a positive correlation to a USD negative environment, in our view, favours a weaker GBP.”

The UK also reached a trade deal with the US with a reduction in tariffs on steel to zero while the tariff on cars will be cut to 10%.

The overall baseline tariff will, however, remain at 10%.

In return, the US will gain improved access to the UK market, especially in agriculture.

The UK and EU will hold a summit on May 19th.

ING commented; “The deal had already been largely priced in, and the implications for the UK economy are not significant. That said, the UK has now signed two trade deals in quick succession (with India and the US), and that is keeping markets hopeful on trade talks with the EU – which would have much more meaningful implications for the UK, and can lend a hand to troubled British finances.”

Credit Agricole noted some positives; “It should be also mentioned that the BoE outlook for the economy could improve from here, given that the MPC has not pencilled in the impact from the trade deal between the US and UK.”

The bank still sees scope for Pound gains; “markets will focus on BoE speeches as they gauge the magnitude of the bank’s easing bias in the wake of the May policy meeting. Absent any significant data disappointments or dovish surprises, the still undervalued GBP could outperform the EUR.”

RBC is still concerned over UK fundamentals; “its net international investment position is negative not positive. That means while EUR and JPY benefit from a Fed cutting cycle, GBP should lag, leading EUR/GBP higher in 2026.”

The bank added; “The 2022 Truss episode has done lasting damage in that even under pretty extreme global conditions, gilt investors, and by extension the UK govt, see limited room for the govt to offer much fiscal support.”

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TAGS: Currency Predictions Pound Euro Forecasts

• The GBP/USD weekly forecast is optimistic after the US-UK trade deal.

• Some BoE policymakers were not ready to cut interest rates.

• The dollar had a solid week due to optimism about easing trade tensions.

The GBP/USD weekly forecast is optimistic, as the US-UK trade deal alleviates concerns about growth in Britain.

Ups and downs of GBP/USD 

The GBP/USD pair had a bullish week but closed below its highs due to dollar strength. The pound had a good week after the US signed a trade deal with the UK, leaving a baseline tariff of 10%. Moreover, the BoE policy meeting revealed that some policymakers were not ready to cut interest rates. As a result, rate cut expectations dropped. 

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However, the dollar also had a solid week after the Fed remained cautious and due to optimism about easing trade tensions. The US-UK deal opened the door for a US-China deal.

Next week’s key events for GBP/USD

Next week, market participants will focus on data from the UK, including employment, manufacturing production, and GDP. Meanwhile, the US will release figures on consumer inflation, retail sales, and wholesale inflation. 

The UK employment and GDP reports will shape the outlook for future Bank of England policy moves. Upbeat numbers will lower expectations for rate cuts, supporting the pound. On the other hand, cracks in the economy would pile pressure to cut rates. 

The same will happen in the US with inflation and sales data. Higher inflation and weak sales would reflect the impacts of Trump’s tariffs.

GBP/USD weekly technical forecast: Bulls retest the SMA line

On the technical side, the GBP/USD price has pulled back to retest the 22-SMA support after pausing near the 1.3401 resistance level. Despite the pullback, the price looks ready to bounce higher. It trades above the SMA, and the RSI is above 50, supporting a bullish bias. 

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GBP/USD has maintained a bullish trend for some time, despite puncturing the 22-SMA. At the same time, it has respected a support trendline below the SMA, bouncing to new highs from the line. The most recent high came near the 1.3401 key level. Here, the price paused to consolidate as the SMA caught up. 

Given the strong bullish bias, the price might break above 1.3401 next week for a higher high. Such a move would allow bulls to target the 1.3603 key level. 

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The EURJPY pair provided a positive signal by its rally above the barrier at 163.25, to record some gains by hitting the 163.90 level, to provide sideways trading to gather the positive momentum again.

We will depend on forming a new support base at 162.65 level, note that the attempt of surpassing 50 level will increase the chances for forming bullish waves, to expect reaching 164.20, to repeat the pressure on the resistance at 164.90.

The expected trading range for today is between 163.00 and 164.20

Trend forecast: Bullish

• GBP/USD trades in positive territory above 1.3250 early Friday.
• The Bank of England lowered the policy rate by 25 bps as expected.
• The near-term technical outlook points to a loss of bearish momentum.

Following a two-day slide, GBP/USD dropped toward 1.3200 early Friday and touched a fresh multi-week low before regaining its traction. The pair trades above 1.3250 in the European session but remains below key technical resistance levels.

The Bank of England (BoE) announced on Thursday that it cut the policy rate by 25 basis points (bps) to 4.25%, as widely anticipated. Unexpectedly, two policymakers voted in favor of holding the policy rate unchanged, while two others voted for a 50 bps cut. Meanwhile, the BoE noted in its policy statement that a gradual and careful approach to further withdrawal of monetary policy restraint remains appropriate.

Although GBP/USD edged higher with the immediate reaction to the BoE event, the broad-based US Dollar (USD) strength forced the pair to turn south during the American trading hours on Thursday. US President Donald Trump held a press conference to announce a trade deal with the UK and said that tariffs with China could be lowered, easing worries about a deepening trade conflict and supporting the USD.

Investors will pay close attention to comments from Federal Reserve (Fed) officials heading into the weekend. The CME FedWatch Tool shows that markets currently price in about a 14% probability of a 25 bps Fed rate cut in June. In case Fed officials adopt a hawkish tone and reiterate the need for patience with regard to rate cuts, given the uncertainty surrounding the inflation outlook, the USD could preserve its strength and cap GBP/USD’s upside.

In the meantime, investors could turn cautious ahead of the US-China trade talks this weekend. In this scenario, profit-taking toward the end of the European session could cause the USD to weaken against its rivals.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart recovers toward 50, pointing to a loss of bearish momentum. Nevertheless, technical buyers could remain reluctant to bet on a leg higher until GBP/USD clears key resistance levels at 1.3275 (Fibonacci 23.6% retracement level of the latest uptrend) and 1.3310-1.3320 (20-day Simple Moving Average (SMA), 50-period, 100-period SMAs on the 4-hour chart). A daily close above the latter could open the door for additional gains toward 1.3400 (static level).

On the downside, interim support seems to have formed at 1.3230 (static level) before 1.3170 (Fibonacci 38.2% retracement) and 1.3150 (200-period SMA).

• EUR/USD rebounds following early decline, trades near 1.1250.
• The technical outlook suggests that the bearish bias remains unchanged in the near term.
• Market attention turns to comments from Federal Reserve policymakers.

EUR/USD remained under bearish pressure following Wednesday’s decline and lost more than 0.5% on Thursday. After touching its weakest level in nearly a month below 1.1200 in the Asian session on Friday, the pair stages a rebound and trades near 1.1250.

The Federal Reserve’s (Fed) hawkish tone helped the US Dollar (USD) gather strength against its rivals in the second half of the week. Additionally, the announcement of the UK-US trade deal further supported the USD, causing EUR/USD to push lower in the American trading hours on Thursday.

Early Friday, US stock index futures trade mixed, pointing to a cautious stance. The economic calendar will not feature any high-tier data releases but several Fed policymakers will be delivering speeches.

In case Fed officials reiterate the cautious approach to policy-easing, the USD could hold its ground and make it difficult for EUR/USD to gain traction heading into the weekend. According to the CME FedWatch Tool, markets currently see about a 17% probability of a 25 basis points Fed rate cut in June, suggesting that the USD has some room left on the upside if investors remain convinced that the Fed will wait until July to adjust the policy.

On the flip side, officials from the European Central Bank (ECB) hinted at the continuation of rate cuts, limiting the Euro’s gains. ECB policymaker Olli Reh said on Friday that the Eurozone’s growth outlook is weakening, while disinflation remains on track. Similarly, Governing Council member Gediminas Šimkus noted that there was downward pressure on inflation and added that a rate cut in June is needed.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 40, suggesting that EUR/USD’s latest rebound was a technical correction rather than the beginning of a reversal.

On the downside, 1.1175 (Fibonacci 50% retracement of the latest uptrend) aligns as next support before 1.1080 (Fibonacci 61.8% retracement). Looking north, resistances could be spotted at 1.1270 (Fibonacci 38.2% retracement), 1.1350 (100-period Simple Moving Average) and 1.1380 (Fibonacci 23.6% retracement).

Copper price failed to settle above the extra support at $4.5400 by stochastic negative momentum, to push it to suffer several losses by hitting $4.4200, to settle below the moving average 55.

The continuation of the negative pressures makes us prefer more of the negative trading in the current period, to target $4.3200 level, while regaining the bullish bias requires forming strong bullish waves, to settle above $4.6600 level, which represents %50 Fibonacci correction level.

The expected trading range for today is between $4,3800 and $4.5800

Trend forecast: Bearish

USD/JPY Technical Analysis

The US dollar has flexed its muscles against the Japanese yen and it’s interesting that the 145 yen level has been like a brick wall. If we can make a fresh high above the early part of the week and the 50 day EMA, I think that will bring in a lot more buyers of US dollars and people willing to take advantage of the interest rate differential as it certainly favors the US dollar. At that point in time, we could be looking at a move to the 148 yen level. In the meantime, I think short-term pullbacks continue to be buying opportunities as it looks like we’re trying to base here.

AUD/USD Technical Analysis

The Australian dollar initially tried to rally but has given back gains. We are getting dangerously close to seeing a reversal here as well. A move below the 50 day EMA is enough for me. At that point in time, I start shorting. I think it was obvious after the Federal Reserve meeting that the Fed is not going to cut rates in June, unlike what most of the trading community seemed to be banking on.

And now, the odds of a rate cut later this year are starting to drop a little bit as well. People still believe in a couple of rate cuts coming out of the Federal Reserve, but at the same time, he made it pretty clear during the press conference yesterday that he really didn’t know what they were going to do because there were far too many variables out there that caused confusion.

For a look at all of today’s economic events, check out our economic calendar.

May 8, 2025 – Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Rebounds Against Dollar as BoE Strikes Cautious Tone

The Pound-to-Dollar exchange rate wavered on Thursday but ultimately found a foothold, bolstered by a slightly more hawkish tone from the Bank of England (BoE) and renewed optimism over UK-US trade ties.

At the time of writing, GBP/USD was trading around $1.3329, having rebounded from earlier lows following a turbulent twenty-four hours.

The Pound (GBP) initially struggled on Thursday ahead of the BoE’s widely expected interest rate cut, but quickly rallied as markets digested the tone of the central bank’s messaging.

While the Monetary Policy Committee (MPC) voted to reduce the Bank Rate by 25 basis points, the decision was not unanimous, with two members voting to keep rates unchanged.

This dissent, alongside only a modest revision to the BoE’s inflation outlook, hinted at a more cautious approach to future cuts than investors had anticipated. As a result, Sterling clawed back earlier losses and even advanced against some major peers.

Adding to the Pound’s resilience was the recent optimism around UK-US trade relations. After hinting at a deal overnight on Wednesday, President Donald Trump then confirmed that a ‘full and comprehensive’ deal between the UK and US would be the first agreement announced since he introduced his ‘liberation day’ tariffs.

Coming on the heels of a UK-India agreement and amid broader signs of rebuilding post-Brexit relations with the EU, markets welcomed the news as a potential positive for the UK economy.

Meanwhile, the US Dollar (USD) managed to avoid significant losses, helped by residual strength from Wednesday’s Federal Reserve decision. The Fed opted to keep interest rates steady, as expected, but struck a tone that suggested policymakers were in no hurry to ease monetary policy.

Fed Chair Jerome Powell reinforced this view during the post-decision press conference, indicating that the bank would prefer to wait and see how tariffs impact the US economy before acting again. He also flagged inflation risks as a key concern, which prompted investors to dial back expectations of a near-term rate cut.

This shift in outlook gave the US Dollar a lift midweek and helped it avoid steeper losses on Thursday, even as the Pound regained some traction.

Looking ahead, GBP/USD could remain sensitive to commentary from key central bank figures due to speak on Friday.

BoE Governor Andrew Bailey is due to speak in the morning, and any indication that the British central bank might speed up rate cuts if inflation cools more quickly could weigh on the Pound.

Later in the day, a string of speeches from Fed officials will be closely watched. If the messaging echoes Powell’s stance – favouring a cautious and data-driven approach – the US Dollar could remain supported. Conversely, if recession risks or concerns over the labour market come to the fore, the ‘Greenback’ may weaken.

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TAGS: Pound Dollar Forecasts