The GBP to USD exchange rate is currently range-bound.
The key drivers include:
- The Bank of England is expected to reduce interest rates to 3.25% by mid-2026 amid slowing inflation and growth, impacting the pound. The Federal Reserve may cut rates more cautiously, maintaining some dollar strength.
- Improving global growth and rising commodity prices are likely to add volatility to the dollar’s performance.
- Inflation in the UK is projected to peak around 4% before gradually declining, while U.S. inflation remains above 2%, affecting both currencies differently.
In the near term, the GBP/USD rate is expected to fluctuate within a stable range, reflecting current trading levels.
Risks that could affect this outlook include a significant improvement in U.S. economic performance, which could strengthen the dollar, and unexpected fiscal policy changes in the UK that may further weaken the pound.