March 19, 2025 – Written by David Woodsmith
STORY LINK Pound to Dollar Week Ahead Forecast: GBP/USD Dips as Markets Await Fed
The Pound Sterling (GBP) lost ground against the U.S. Dollar (USD) during Wednesday’s European trading session as investors exercised caution ahead of the Federal Reserve’s latest policy announcement.
At the time of writing, the Pound US Dollar exchange rate (GBP/USD) was trading at around $1.2973, down approximately 0.2% from Wednesday’s opening levels.
The US Dollar (USD) strengthened on Wednesday as investors positioned themselves ahead of the Federal Reserve’s upcoming interest rate decision.
While the Fed is widely expected to keep rates unchanged this month, the primary market focus will be on the bank’s forward guidance.
This has the potential to drive volatility in USD exchange rates, given the uncertainty surrounding the Fed’s policy trajectory.
If Fed Chair Jerome Powell signals growing concerns about a potential US recession, it’s likely to signal a more dovish approach to policy going forward, leading the US Dollar to retreat to multi-month lows.
Conversely, if Powell emphasises the inflationary risks linked to President Donald Trump’s latest tariff policies, speculation could grow that the Fed will maintain a hawkish position to counteract rising prices, potentially boosting USD demand.
The Pound (GBP) was largely directionless on Wednesday as traders refrained from making significant moves ahead of the Bank of England’s (BoE) upcoming interest rate decision.
Similar to the Fed, the BoE is expected to leave rates unchanged this month.
Previously, markets anticipated the next rate reduction would come in May. However, recent data has suggested that inflationary pressures in the UK remain persistent.
If the BoE signals a reduced likelihood of a near-term rate cut, the Pound could strengthen.
Looking to the second half of the week, the Bank of England’s rate decision is expected to be a key driver of movement in the Pound to US Dollar exchange rate.
Before that, however, the UK’s latest employment data is set to be released on Thursday morning.
Economists predict that while unemployment remained stable in January, wage growth likely slowed.
If wage growth has softened, it could weigh on the Pound as it may add to expectations that the BoE will need to loosen policy sooner rather than later.
Meanwhile, US initial jobless claims figures will also be in focus. If the latest data points to a weakening US labour market, the US Dollar could face some downward pressure.
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TAGS: Pound Dollar Forecasts
