**Pound to US Dollar Forecast: GBP/USD Approaches 1.35 as ISM PMI Data Looms**
*By James Lovick, originally published on ExchangeRates.org.uk*
The Pound Sterling (GBP) continues its upward momentum against the US Dollar (USD), drawing heightened attention from investors and market analysts as the GBP/USD currency pair hovers just below the psychologically significant 1.35 threshold. With the upcoming release of the ISM Purchasing Managers’ Index (PMI) data in the United States, traders are keenly anticipating whether the Pound can extend its gains or if a reversal might be on the horizon.
This article provides an in-depth look at the fundamental drivers, technical outlook, and expert forecasts shaping the Pound to Dollar exchange rate as market participants brace for critical US economic data. Drawing on the insights from James Lovick at ExchangeRates.org.uk, we will examine the latest developments influencing both the British Pound and the US Dollar, the impact of upcoming economic reports, and what analysts expect for the GBP/USD in the near-term and through the end of 2025.
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### GBP/USD Heading Toward Key 1.35 Level
In recent months, Sterling has demonstrated steady resilience against the US Dollar, bolstered by improved economic outlooks in the United Kingdom and speculation over the Bank of England’s monetary policy direction. The robust performance comes at a time when the Dollar is contending with mixed data, a dovish tilt from the Federal Reserve, and growing uncertainty over the US macroeconomic landscape.
According to the article by James Lovick, the GBP/USD exchange rate has been trending higher, fueled by:
– Stronger-than-expected UK inflation figures
– Hints of persistent inflationary pressures
– Rising UK wage growth outperforming expectations
– Waning US data momentum
– Market speculation about imminent Fed rate cuts
As the pair approaches the 1.35 handle, market participants are laser-focused on the next round of key data releases, most notably the ISM PMI figures in the US, which are expected to provide fresh direction for Dollar bulls and bears alike.
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### Recent Performance and Market Drivers
#### UK Economic Data Surprises
Positive surprises in UK economic releases have underpinned the Pound’s advance. May and June inflation figures revealed that price pressures remain more entrenched than the Bank of England would prefer. Simultaneously, UK wage growth has accelerated, reinforcing the case for a more cautious approach to rate cuts from the BoE.
**Key UK data supporting Sterling:**
– CPI inflation remains above target, defying expectations of a swifter decline
– Average earnings growing at a robust pace, signaling tightness in the labor market
– Consumer spending rebound, providing a boost to domestic GDP forecasts
These developments have led markets to reassess the Bank of England’s policy trajectory. Traders are now pricing out aggressive rate cuts, instead expecting a more gradual path that should keep Sterling supported relative to peers.
#### Softening US Economic Momentum
While the UK data flow has outperformed, the US has started to exhibit signs of cooling, with several recent data prints falling short of expectations. The US labor market, while still resilient, has shown early cracks via rising jobless claims and slowing wage growth. Meanwhile, inflation has moderated further, reducing pressure on the Federal Reserve to maintain its hawkish stance.
**Recent US Dollar headwinds include:**
– Subpar nonfarm payrolls and employment readings
– Slower-than-expected consumer price inflation
– ISM manufacturing and services surveys showing contraction or soft growth
– Lowered expectations for US GDP growth in 2024 and 2025
With the Federal Reserve signaling flexibility and open-mindedness regarding rate adjustments, market pricing now reflects a growing likelihood of one or more rate cuts before year-end. This dynamic has weighed on the Dollar and buoyed the Pound.
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### The ISM PMI Factor: Why it Matters
The upcoming release of the US ISM Manufacturing and Services
Read more on GBP/USD trading.