What’s next as the British pound hits its highest in more than three years?

Business
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June 25, 2025
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The British pound is widely forecast to continue rising against the U.S. dollar.

Matt Cardy | Getty Images

The British pound is hovering at its highest level in more than three years — and analysts are divided on the potential for further upside.

Britain’s currency was last seen trading around the $1.36 mark on Wednesday morning in London.

It marked a slight drop from Tuesday, when sterling hit its highest level since January 2022.

So far this year, the pound has surged 8.7% against the greenback.

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GBP/USD price

Against the euro, however, sterling is down 2.9% year-to-date. It was last seen trading marginally higher against the euro zone currency, with one pound buying around 1.173 euros.

Dollar weakness

According to Janet Mui, head of market analysis at RBC Brewin Dolphin, much of the pound’s upward trajectory is actually more to do with underlying dollar weakness than faith in sterling itself.

“The relative strength of the pound has been more of a weak U.S. dollar story this year,” she told CNBC by email on Wednesday.

U.S. President Donald Trump’s unpredictable trade policies shook confidence in American assets earlier this year, which in turn has sparked concerns in markets about de-dollarization.

Dollar index year to date.

“Markets had been overly bearish on the UK following Chancellor Reeves’ Budget,” he added. “Consequently, positive data surprises became supportive to GBP. However, we continue to expect UK economic growth and inflation to slow; signs are already showing, which the Bank of England is also acknowledging. This supports further BoE rate cuts, and ultimately weighs on the pound.”

Mangwiro also noted that in his view, de-dollarization risks seemed “over-blown.”

“Sentiment will likely reverse as US growth outlook rebounds and corporate earnings remain resilient,” he said. “Along with current extreme short USD positioning, this should support a USD rebound, dragging Cable lower.”