Pound Surges Amid Dollar Weakness and Prospects of Delay in UK Rate Cuts

The British pound held steady near 1.3500 against the U.S. dollar last week, but a new report from UBS predicts a significant rally this week, potentially pushing the GBP/USD pair past 1.3800 and even breaking through all current resistance levels to reach 1.400. This optimistic forecast comes amid a weakening U.S. dollar, driven by growing concerns over the Federal Reserve’s independence and President Trump’s legal battles to exert control over the central bank, which have shaken investor confidence.

UBS suggests that a potential delay in UK interest rate cuts could bolster the pound in the coming months, providing a supportive backdrop for its rise. However, HSBC warns that proposed tax hikes in the UK might hinder economic growth, posing a long-term risk to the pound’s strength. Meanwhile, the U.S. dollar faces mounting challenges, including a retreat from July’s gains and expectations of further losses due to looser monetary policies and doubts about the autonomy of U.S. institutions.

Adding to the dollar’s woes, major banks like Scotiabank and BNP Paribas anticipate that political pressures from the White House could force changes in Federal Reserve policy, further undermining the dollar’s performance. In contrast, the pound is poised to capitalize on the UK’s cautious approach to rate cuts, despite domestic economic headwinds. As global markets navigate these uncertainties, can the pound sustain its upward momentum, or will domestic challenges and dollar volatility shift the balance?