**Pound to US Dollar Forecast: GBP/USD Near 1.35 as ISM PMI Looms**
*Adapted from analysis by Tim Clayton, [ExchangeRates.org.uk](https://www.exchangerates.org.uk/), originally published September 1, 2025*
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### Introduction
The GBP/USD currency pair entered September with increasing volatility, influenced by critical economic indicators and the anticipation surrounding the upcoming US ISM Purchasing Managers’ Index (PMI) report. As Sterling hovers near the 1.35 mark against the US Dollar, market attention has been fixed on key macroeconomic drivers that could shape the pound’s trajectory against its American counterpart. In this article, we provide an in-depth analysis of the latest trends, market sentiment, and forward-looking forecasts for the GBP/USD pair, with a specific focus on the effects of the ISM PMI report and the underlying economic landscape.
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### Recent GBP/USD Performance
The pound has exhibited notable resilience against the US dollar in the weeks leading up to the start of September. Several factors have underpinned this performance:
– **Relative Strength of UK Economic Data**: Recent UK data, especially concerning employment and retail sales, have surpassed expectations, lending support to Sterling.
– **Dollar Softness**: Periods of weaker-than-anticipated US data, particularly from the labor and housing markets, have weighed on the greenback.
– **Global Risk Appetite**: Risk-on sentiment in broader financial markets has underpinned higher-yielding currencies like the British pound.
On the final trading days of August, GBP/USD consistently traded in the 1.34 to 1.35 range, having reversed earlier summer losses. This rebound marks a significant shift in sentiment, with growing belief that the Bank of England (BoE) may maintain a relatively hawkish stance even as the US Federal Reserve signals caution on further rate hikes.
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### Macroeconomic Backdrop: UK and US
#### UK Economic Indicators
A review of recent UK economic developments reveals several supportive factors for GBP:
– **Inflation**: The UK’s Consumer Price Index (CPI) remains elevated above the BoE’s target, driven by persistent services sector inflation. This sustains the prospect of higher-for-longer interest rates.
– **Labour Market**: Robust wage growth and a tight jobs market suggest underlying economic resilience, providing indirect support for Sterling.
– **GDP Growth**: While full-year growth expectations remain subdued, the country continues to avoid technical recession, and sentiment has improved on the back of modest GDP expansion in the second quarter.
#### US Economic Highlights
Conversely, the US economy faces a more mixed outlook:
– **Labour Market**: While still showing headline strength, recent non-farm payrolls have underwhelmed versus consensus forecasts. There are early signs of a cooling jobs market, which lessens pressure on the Federal Reserve to continue aggressive tightening.
– **Inflation**: The US inflation rate, though trending lower, remains above the Federal Open Market Committee’s (FOMC) preferred 2 percent target.
– **Growth Dynamics**: US GDP growth forecasts have been revised lower amid weak manufacturing and increased consumer caution.
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### Key Event: US ISM Manufacturing PMI
The upcoming US ISM Manufacturing PMI reading stands out as this week’s most influential data point for GBP/USD traders. This leading indicator offers valuable insight into business conditions across America’s manufacturing sector. The following aspects are crucial for the market:
– **Consensus Estimate**: Analysts expect the ISM Manufacturing PMI to tick marginally higher but remain below the critical 50-level, indicating continued contraction in the sector.
– **Implications for Federal Reserve Policy**: Should the ISM data disappoint, it would reinforce expectations that the Fed will pause or slow its hiking cycle, driving further dollar weakness.
– **Market Sensitivity**: GBP/USD has shown heightened sensitivity to major US data surprises in recent weeks, particularly if outcomes deviate significantly
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