25th September 2025
The recent appreciation of the pound against the U.S. dollar is being driven more by underlying U.S. currency weakness than by improving sentiment towards the UK economy, according to a report by Oxford Economics released today.
“Some signals suggest the appreciation is overdone and the pound is vulnerable to a depreciation,” wrote Edward Allenby, Senior UK Economist at Oxford Economics and author of the analysis.
Allenby noted that the firm’s current forecast projects that the pound will hold steady against the dollar in a 1.33-1.34 range, “as we expect the recent weak-dollar narrative will extend into next year,” he said.
“But the UK's challenging fiscal position has kept markets volatile in recent months, and the upcoming Budget could provide a catalyst for sterling to reprice if the government is unable to convince investors that its plans will restore the public finances to a sustainable path,” Allenby added.