HSBC Forecast: GBP/USD To Plunge To 1.20 By End Of 2025
The Pound to Dollar exchange rate (GBP/USD) hit 2-month highs at 1.2640 this week before a limited correction.
Although the dollar has retreated, HSBC expects dollar dominance will continue with the currency gaining fresh traction during the year.
In this context, the bank expects GBP/USD to trade at 1.20 at the end of this year.
HSBC notes that the dollar has retreated from early-January highs with the dollar index declining around 3.0%.
The bank considers that this retreat is due to markets hoping that the impact of trade tariffs will be less than feared.
HSBC warns that markets may be in danger of complacency with the risk that the Administration’s stance could be more aggressive than expected, especially given the demands to raise revenue to help fund the budget deficit.
HSBC also expects that relatively firm growth and high yields will help underpin the US currency.
It does issue a caveat that high budget deficit could come back to undermine the dollar over the longer term.
As far as the UK is concerned, HSBC notes that the Bank of England has maintained a cautious stance.
Nevertheless, it expects that a deteriorating labour market and an easing of core inflation pressures will allow greater than expected interest rate cuts during the year which will underpin the Pound.
Tim Clayton
Contributing Analyst
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