– Written by


Tim Boyer

STORY LINK GBP/USD Forecast: Pound Sterling Firm but Political Risks Linger

The Pound to US Dollar (GBP/USD) exchange rate found a modest footing at the start of the week, with USD being dented by US trade policy uncertainty.

At the time of writing, GBP/USD hovered close to $1.3480, unchanged from the session’s opening levels.

The US Dollar was muted at the start of this week as investors grappled with fresh uncertainty linked to US tariff strategy.

This follows the US Supreme Court ruling on Friday overturning Donald Trump’s tariff framework introduced under emergency economic powers legislation. In response, the White House swiftly announced a new blanket tariff of 10%, which was then increased to 15% over the weekend.

The rapid sequence of policy changes has left investors seeking clarity, particularly regarding whether previously negotiated trade arrangements remain valid and whether US importers could reclaim costs tied to earlier duties.

Despite this uncertainty weighing on sentiment, downside pressure on the ‘Greenback’ remained somewhat limited as geopolitical tensions, including speculation over possible US military action involving Iran, encouraged some cautious positioning.

Sterling edged higher through Monday’s trading session, building on momentum generated by a run of upbeat UK data released late last week.

Stronger retail sales figures, alongside resilient PMI readings, helped reinforce confidence in the UK’s economic outlook. These releases were complemented by data showing the government recorded a sizeable budget surplus in January, welcome news for Chancellor Rachel Reeves ahead of the upcoming Spring Statement.

However, gains in the Pound were restrained by domestic political uncertainty ahead of Thursday’s Greater Manchester by-election.

A weaker-than-expected performance for the Labour Party could renew scrutiny surrounding Prime Minister Keir Starmer’s leadership, introducing an additional layer of risk for GBP investors.

GBP/USD Forecast: Inflation Outlook and BoE Testimony in Focus

Movement in the Pound US Dollar exchange rate may hinge on comments from Bank of England Governor Andrew Bailey and Monetary Policy Committee member Megan Greene, who are due to appear before the Treasury Committee on Tuesday.

Any indication that policymakers are becoming more comfortable accelerating interest rate cuts as inflation slows could weigh on Sterling sentiment.

Meanwhile, with the US economic calendar relatively quiet, the US Dollar may remain primarily driven by developments surrounding trade policy uncertainty during the early part of the week.

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TAGS: Pound Dollar Forecasts

– Written by


Frank Davies

STORY LINK Euro to Dollar Forecast: EUR/USD Steady After US Tariffs Struck Down

The Euro to Dollar exchange rate (EUR/USD) held firm near 1.18 after volatile trading triggered by a US Supreme Court ruling that struck down President Trump’s proposed reciprocal tariffs.

While the dollar initially drew support from geopolitical tensions and firmer oil prices, the legal setback to tariff policy has complicated the outlook for US trade strategy and added to broader structural concerns weighing on the greenback.

EUR/USD Forecast: US tariffs struck down

Danske Bank forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.25 on a 12-month view.

The dollar gained net support from increased speculation that the US would launch a military strike against Iran as oil prices strengthened.

There was, however, choppy trading on Friday as the US Supreme Court ruled against President Trump’s reciprocal tariffs with EUR/USD around 1.18 from lows just below 1.1750.

Fed policy will remain a key overall element, especially with changes to the Board.

Danske Bank commented; “Warsh’s Fed chair nomination has calmed independence fears, immigration policy rhetoric has eased, and tariff threats have diminished. At the same time, monetary policy divergence has emerged as a key theme.”

According to Commerzbank; “the market could question the more than two Fed rate cuts that are currently discounted for this year with yields testing the upside.”

There is still speculation that the dollar will face structural barriers.

Danske Bank discussed potential risks to the outlook; “If the capital rotation out of US assets continues and a sharp US recession hit, EUR/USD could break substantially higher than our forecast suggests. In this environment, commodity currencies would also face a larger hit.”

It added; Conversely, persistent resilient US data and/or renewed euro area weakness that could prompt the ECB to cut again this year could keep the USD stronger-for-longer.

Scotiabank sees dollar headwinds; “We continue to expect broad-based weakness in the USD against all of the major developed economy currencies. The weak USD forecast extends through 2026 and into the end of our forecast horizon at the end of 2027, reflecting an outlook for relative central bank policy that includes near-term Fed easing and steady policy settings for the Fed’s peers.”

RBC Capital Markets takes a similar view “We continue to expect further US dollar weakness, mainly as US stocks and US rates are showing considerable underperformance vs European and Global benchmarks. This underperformance is materially surprising given that US growth continues to be quite strong and some of the best in the world.”

RBC added; “we note the cost of hedging USD assets back to EUR is in the bottom 25% percentile since 2022.”

During the week, there was some chatter that ECB President Lagarde would leave her post before the end of her 8-year term.

MUFG commented; “while all of the speculation on who takes over could be market-moving, a divergence of inflation relative to the target will still be more important in shaping the direction of monetary policy rather than who becomes President.”

According to Standard Chartered; “The ECB appears to have concluded its rate-cut cycle. The EUR should benefit from improved investor confidence and resilient trade data to trade near 1.21.”

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TAGS: Euro Dollar Forecasts