**2025 Pound to US Dollar Forecast: GBP/USD Near 1.35 as ISM PMI Looms**
*By James Watson, originally published on ExchangeRates.org.uk*
The British pound (GBP) continues to show strength against the US dollar (USD), moving closer to the psychologically important 1.35 level. Amid increasing anticipation around the upcoming US ISM Purchasing Managers’ Index (PMI) data, market participants remain focused on key economic indicators and their potential to affect monetary policy on both sides of the Atlantic.
This article provides a comprehensive analysis of the latest GBP/USD trends, assesses contributing factors, and explores what the near-term future might hold for the world’s most traded currency pair.
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### GBP/USD Momentum Approaches 1.35
In recent days, the pound has maintained a gradual but discernible upward trajectory, reflecting both domestic developments and broader international dynamics. The GBP/USD exchange rate hovers near the 1.35 mark, emboldened by a combination of a firmer British economic outlook and rising expectations for a potential US Federal Reserve rate pause.
Key recent movements include:
– **GBP/USD trading near 1.3470**, its highest level since the late spring of 2024
– Sterling’s resilience amid mixed UK economic figures
– US dollar softness driven by waning safe-haven demand and Federal Reserve policy speculation
Financial analysts suggest that the move toward 1.35 is significant. Not only is it a technical resistance level, but it also represents a psychological threshold that could set the tone for further bullish price action if broken.
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### Market Focus: Upcoming ISM Manufacturing PMI
One of the most critical near-term data releases is the ISM Manufacturing PMI in the US, scheduled for release imminently. This forward-looking indicator measures the health of the American manufacturing sector and is closely watched by investors for clues about broader economic activity.
**Why does ISM PMI matter?**
– The ISM Manufacturing PMI is a strong leading indicator of US economic health.
– A PMI reading above 50 indicates expansion, while below 50 signals contraction.
– The data is crucial for the Federal Reserve’s assessment of economic momentum, potentially affecting interest rate decisions.
**Market expectations** heavily influence currency moves around this release:
– A weaker than expected PMI could signal economic slowdown and encourage further dollar selling.
– A stronger reading might reverse some recent dollar declines, especially if it revives expectations for Fed rate hikes.
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### Key Drivers of GBP/USD Performance
#### 1. **US Economic Uncertainty**
The US economy has sent mixed signals in recent months. While labor markets remain tight, consumer confidence has wavered and manufacturing data has been patchy. The dollar’s weakness is particularly notable, as investors speculate that the Federal Reserve may be less aggressive in tightening policy through the remainder of the year.
– **Fed policy pause speculation**: Softer data has led markets to price in a greater likelihood that the Fed will leave rates unchanged.
– **US yields have moderated**, reducing the greenback’s appeal in global currency markets.
– **Global risk sentiment**: As risk appetite improves, safe-haven demand for the US dollar has declined, buoying currencies like the British pound.
#### 2. **UK Economic Resilience**
The UK’s economy has displayed signs of resilience, albeit with persistent challenges. While growth rates remain subdued, recent survey data and corporate earnings point to underlying stability.
– **Inflation remains elevated**, keeping the Bank of England (BoE) alert and leaning toward policy tightening.
– **Business investment and consumer activity** hold up better than expected.
– **Labour market strength**, with unemployment at relatively low levels, gives the BoE more room to act without fearing a sharp downturn.
#### 3. **Central Bank Outlooks**
Diverging expectations around the BoE and the Fed remain a pivotal driving force for GBP/USD.
– The market currently anticipates the **Bank of England will keep interest rates
Read more on GBP/USD trading.