March 16, 2025 – Written by Frank Davies
STORY LINK Pound to Dollar Weekly Forecast: HSBC Revises to 1.23 by End 2025
Many investment banks remain unconvinced over the UK outlook, but pound to Dollar (GBP/USD) exchange rate forecasts have generally been increased amid further doubts over the dollar.
One of the sceptics has been HSBC and its latest update it commented; “We continue to believe the BoE may cut by more than this and forecast GBP-USD to finish the year at 1.23. However, this is an upward revision to our prior forecast of 1.20, reflecting some tailwinds for European fiscal policy, and perhaps more government spending in the UK.”
Bank of America maintains a more positive Pound stance as well as medium-term dollar losses and expects GBP/USD will strengthen to 1.38 at the end of 2025 with further gains to 1.49 at the end of 2026.
GBP/USD hit 4-month highs just below 1.30 during the week before a retreat towards 1.2900 as markets attempted to take stock of huge global developments.
The dollar debate continues to rage amid controversial Administration policies and the recent dollar slide.
NatWest commented, “First and foremost, market participants seem to be challenging the assumption that Trump 2.0 tariff policy is more damaging for external ex-US growth than internal US growth.”
It added, “A second factor supporting cyclically-linked currencies in spite of tariff risk is the broad assumption that the performance of the US economy and equity market will ultimately “enforce” an easier stance on tariff policy.”
According to RBC, “right now, we see USD trapped between conflicting cross-currents, and our forecast profile is our best guess for how the timing of each may play out. For the next few weeks, we think markets will be dominated by ongoing pricing out of US exceptionalism as US data slow and hard data likely follow soft data.”
RBC does expect a Q2 dollar revival; “as we enter the second quarter, Trump’s reciprocal tariffs are likely to shift sentiment for USD. In this context, the bank expects a spike stronger for the dollar.
It notes that the narrative will change again if the economy does slide into recession; “If it does, and the new administration persists in its policy choices, we may be forced to revise our USD outlook lower again.”
According to HSBC, “the US exceptionalism narrative that served the USD well is being questioned. This warrants toning down how much the USD can strengthen in the coming quarters. However, are we facing a bigger USD decline or is this a correction from an overexuberant state? We believe in the latter.”
HSBC added, “A number of things would have to come together for a sustained USD decline, namely Europe’s economy really does improve and the same for China, US growth struggles, pressure on the Fed to cut faster, and tariffs prove benign. We must be aware of this scenario, but do not believe those conditions will take shape soon.”
George Saravelos, global co-head of currency research at Deutsche Bank has repeated the possibility of a structural shift away from the dollar, especially if Wall Street under-performance continues.
According to Saravelos, “If this correlation breakdown between US equities and the dollar continues, it will open up a more structural discussion among European (and global) asset managers on the diversification benefits of unhedged risky-asset dollar exposure. Some press reports suggest this may already be starting. By extension, a sizeable net reduction of dollar exposure would be on the cards.”
He added, “We have for a long time not been believers in the concept of a new (say, Mar-A-Lago) currency accord to weaken the dollar. We do believe that policy that undermines the economic soundness of the dollar would achieve the same thing.”
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