GBP/USD year-ahead forecast: Median, range and upside/downside risks based on projections from 20+ investment banks and FX analysts.View forecasts
The Pound US Dollar (GBP/USD) exchange rate ticked higher on Wednesday, amid a fresh USD selling bias in the wake of US President Donald Trump’s State of the Union address.
Pound to Dollar (GBP/USD): 1.35245 (+0.21%)
Euro to Dollar (EUR/USD): 1.17858 (+0.1%)
Dollar to Japanese Yen (USD/JPY): 156.7135 (+0.52%)
DAILY RECAP:
The US dollar (USD) found itself on the defensive during Wednesday’s European session as markets continued to digest Donald Trump’s State of the Union address.
In the longest State of the Union speech on record, Trump made sweeping claims about his performance during his first year in office, including the impact of his tariffs.
While criticising the Supreme Court for ruling against his previous IEEPA tariff regime, he claimed that the newly imposed global levy is ‘actually probably better, and suggested that tariffs may eventually replace income tax.
Trump also used his speech to reiterate the possibility of the US launching military strikes against Iran, although he suggested that a ‘peaceful solution’ is still his preferred option.
The Pound (GBP) was steady on Wednesday morning, amid a modest repricing of expectations for a Bank of England (BoE) next month.
Comments from BoE Governor Andrew Bailey on Tuesday somewhat tempered bets for what had previously looked like near-unanimous expectations for a 25 basis point cut in March, after he described the upcoming decision as ‘genuinely’ an open question.
Although markets still lean toward easing next month, Bailey’s tone has made the outcome appear less predetermined, offering Sterling some modest support.
Near-Term GBP/USD Forecast: Labour By-Election Risk and US PPI
Turning to the second half of the week, the Pound to US Dollar (GBP/USD) exchange rate may come under pressure from renewed UK political uncertainty.
The impending Greater Manchester by-election carries notable downside risk for Sterling as a loss for Labour is likely to raise fresh questions over Keir Starmer’s long-term political survival.
Meanwhile, in addition to tariff uncertainty, the US Dollar may also be influenced by the publication of the latest US producer price index in the latter half of the week.
A cooling of factory gate prices last month could temper USD demand if markets see this as feeding through to consumers and encouraging the Federal Reserve to continue easing monetary policy.
