**Pound to US Dollar Forecast: GBP/USD Near 1.35 as ISM PMI Looms**
*By Adam Solomon, Analyst at ExchangeRates.org.uk*
The British Pound (GBP) has been showing resilience against the US Dollar (USD), with the GBP/USD exchange rate trading close to the 1.35 mark. The prospect of a major economic indicator release, the US ISM Manufacturing PMI, has injected both anticipation and a touch of caution among market participants. As we head into the end of August and September 2025, volatility is set to remain a constant presence in the foreign exchange markets.
In this comprehensive analysis, we’ll dissect the current state of the GBP/USD currency pair, what’s driving sentiment, and which economic data points could cause recalibration among traders and investors. This outlook considers a blend of macroeconomic fundamentals, trader positioning, technical chart patterns, and forecasts provided by institutional strategists.
## GBP/USD Recent Performance
Over the past several weeks, the Pound Sterling has maintained upward momentum against the US Dollar, posting fresh multi-month highs. Key drivers of this movement include:
– **Robust UK economic data**: Recent figures suggest the UK economy is outperforming expectations, with strong employment numbers, resilient retail sales, and better-than-forecasted GDP growth.
– **Softening US data**: US figures, particularly relating to hiring and inflation, have come in weaker than anticipated, causing a reassessment of the Federal Reserve’s interest rate path.
– **Improved risk sentiment**: Global equity markets have stabilized, reducing safe-haven demand for the US Dollar.
– **Hawkish Bank of England (BoE) stance**: Markets are pricing in a slower path for BoE rate cuts compared to US Federal Reserve expectations.
– **Political certainty in the UK**: With ongoing clarity around UK government policy, GBP appears less vulnerable to political shocks relative to prior years.
## Drivers Behind the GBP/USD Surge
### 1. **Central Bank Policy Divergence**
Currency traders remain acutely focused on interest rate trajectories. The Bank of England, while actively battling inflation, has signaled reluctance to cut rates rapidly, citing persistent price pressures—particularly in wage growth and services inflation.
In contrast, markets are betting the US Federal Reserve will begin its rate-easing cycle sooner. A series of mixed-to-weak US economic reports have reinforced these expectations, pulling the Dollar lower and giving GBP/USD additional legs.
#### Rate Expectations Summary:
– **BoE is forecast to cut rates more cautiously than previously signaled**
– **Fed seen as front-running with potential September, or even summer, rate cuts**
– **Yield differentials narrowing in favor of the Pound**
### 2. **Incoming Economic Data**
The immediate focus centers on the imminent release of the US ISM Manufacturing PMI. Market consensus anticipates a reading near-neutral, but any surprise—positive or negative—will likely spark volatility in GBP/USD.
Other pivotal UK and US data releases include:
– UK Services PMI
– US Non-Farm Payrolls (NFP)
– UK CPI and Wage Data
– US Core PCE Inflation
### 3. **Technical Momentum and Psychological Levels**
Technical analysts are closely watching the 1.3500 threshold, a level not visited since mid-2022. Successful breaches and closes above this area could pave the way for further rallies towards 1.38 and above, while repeated rejections could signal exhaustion and potential reversals.
## Key Themes for GBP/USD Direction
### A. **UK Economic Resilience**
Recent releases paint a resilient, if unspectacular, picture of the British economy. Notably:
– **GDP:** Latest quarterly GDP printed above consensus, driven by services and minor upside in construction.
– **Labour market:** Unemployment remains near historic lows, though wage inflation persists—feeding through to sticky services inflation.
– **Retail sales:** Consumer spending, while truncated by higher costs of living
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