What’s next as the British pound hits its highest in nearly four years?

Business
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June 26, 2025
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The British pound is widely forecast to continue rising against the U.S. dollar.

Matt Cardy | Getty Images

LONDON — The British pound rallied to its highest level in almost four years on Thursday, even as analysts remain divided on the potential for further upside.

Sterling was last seen trading more than 0.5% higher against the U.S. dollar, hitting $1.3736 — its highest level since October 2021.

So far this year, the pound has surged almost 10% higher versus the greenback, according to LSEG data.

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GBP/USD price

Against the euro, however, sterling is down 2.9% year-to-date. It was last seen trading 0.2% 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.”

Jackie Bowie, managing partner and head of Chatham Financial EMEA, labeled the British pound as “a currency that is struggling to regain its former glory” despite playing an “outsized role” in global foreign exchange markets. The outlook for sterling is mixed, in her view.

“Looking at the key fundamentals of the UK, we can see some reasons to be upbeat on the outlook for the GBP but there are challenges too,” she said by email, forecasting “moderate” economic growth backed by government spending.

“Relative monetary policy is expected to keep the GBP attractive, but the geopolitical environment will play a key role in determining whether that benefits the GBP, particularly vs. the EUR (that has benefited from outflows from the US dollar due to Trump’s chaotic policy making and seeming authoritarian approach to government),” she said, also noting that U.S. trade policy and geopolitical tensions posed downside risks.