March 13, 2025 – Written by David Woodsmith
STORY LINK Pound and Euro “Tracks the Broader Trend in US Dollar”, GBP/USD Weakly Bullish
Pound Serling (GBP) ticked lower on Thursday, as the pairing lost momentum following a strong rally earlier in the week.
At the time of writing, the Pound US Dollar exchange rate (GBP/USD) was trading at around $1.2895, down approximately 0.2% from Thursday’s opening levels.
The US Dollar (USD) trended higher on Thursday as investors sought safe-haven assets amid a renewed wave of market caution.
The deterioration in risk appetite stemmed largely from ongoing uncertainty regarding US trade policy, with fears that escalating tensions between the US and its trading partners could weigh on global economic growth in the months ahead.
Adding to market jitters was the looming threat of a US government shutdown, as political deadlock in Washington continues to cast doubt on the passage of a crucial spending bill.
However, the US Dollar’s gains were somewhat tempered by the lingering impact of Wednesday’s consumer price index release.
The latest CPI data showed that inflation cooled more than expected in February, prompting investors to adjust their expectations for the future trajectory of Federal Reserve interest rates.
Despite the potential for lower borrowing costs, hopes that easing monetary policy could help cushion the US economy limited the negative impact on USD exchange rates.
The Pound (GBP) traded in a narrow range on Thursday, struggling to maintain the momentum from its previous session’s rally.
Sterling had strengthened on Wednesday following renewed optimism regarding trade ties between the UK and EU.
While a full return to the EU likely remains off the table, speculation that the UK government may seek closer economic cooperation with the bloc has fuelled hopes of a long-term boost to UK growth prospects.
GBP/USD Exchange Rate Forecast: Weak UK GDP to Weigh on Sterling?
Looking ahead, movement in the Pound to US Dollar exchange rate may be dictated by the UK’s latest GDP figures at the end of the week.
Analysts expect January’s month-on-month growth to slow significantly, with forecasts pointing to a modest 0.1% expansion following a stronger 0.4% rise in December.
If the data confirms a sharp slowdown, it could revive concerns about the UK’s fragile economic outlook and drag the Pound lower.
Meanwhile, USD investors will be closely monitoring the University of Michigan’s latest consumer sentiment index.
With recent declines in consumer confidence fuelling fears of a potential US recession, another drop in sentiment could put fresh pressure on the US Dollar.
According to FX analysts at Scotiabank, “The pound continues to track the broader trend in the USD, absent any major fundamental developments at home.”
“The RICS House Price Index dropped to a lower than expected 11 in February (vs. 20 forecast); the RICS puts the blame on rising uncertainty and weaker confidence, with recent tax increases and slow progress on cutting rates weighing on sentiment.
“The BoE’s cautious easing approach is supportive for the GBP, however, and may help the GBP regain a little ground on the EUR, with the cross showing signs of steadying around the 0.8450 area after sharp, early March gains.”
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TAGS: Pound Dollar Forecasts
