Sterling has surged to $1.38 against the US dollar, its strongest level since October 2021, as a combination of US economic disruption, shifting interest rate expectations and geopolitical uncertainty weakens the greenback.
Currency analysts said the move has been driven more by dollar softness than by a sudden strengthening of the pound, creating what some describe as a rare buying opportunity for consumers and businesses needing US currency.
The rally follows heavy snowfall and ice across the United States caused by Winter Storm Fern, which left almost 600,000 homes without power and triggered thousands of flight cancellations. Economists estimate the disruption could shave up to 1.5 per cent off US first-quarter GDP growth.
Markets are also increasingly pricing in lower US interest rates later this year, reducing the dollar’s yield appeal relative to sterling. At the same time, heightened political uncertainty linked to Donald Trump and ongoing volatility in commodities, including record-high gold and silver prices, have pushed investors away from the dollar.
Tony Redondo, founder of Cosmos Currency Exchange, said the pound’s rise reflected a “perfect storm” of factors.
“The pound’s climb to $1.38 is being driven by US dollar weakness and UK rate expectations,” he said. “Investors are moving away from the dollar due to concerns over trade tariffs and the independence of the Federal Reserve.
“Meanwhile, persistent UK inflation suggests the Bank of England may keep rates higher for longer, which attracts global capital. While some are eyeing a move towards $1.40, the rally may be nearing its peak as traders start taking profits.”
Redondo added that for those needing dollars, current levels are attractive. “At $1.38, you’re getting almost 11 per cent more value than this time last year. Timing the absolute peak is nearly impossible, but buying now locks in a four-year high.”
Prem Raja, head of trading floor at Currencies 4 You, agreed that the move was largely about dollar weakness.
“Sterling’s rise to 1.38 is being driven far more by US dollar weakness than pound strength,” he said. “Markets are increasingly pricing in lower US interest rates, which reduces the dollar’s appeal and encourages investors to rotate out of USD exposure.
“That pressure has been reinforced by political uncertainty, renewed tariff talk, the risk of a government shutdown and President Trump’s comments signalling little concern about a weaker dollar.”
Raja said $1.40 was the next psychological level but warned that short-term pullbacks were likely after such a sharp move. “For those needing to buy dollars, these levels represent a very favourable window,” he added.
Riz Malik, director at R3 Wealth, suggested the weakness in the dollar could be intentional.
“The dollar is supposed to represent stability, but the US is anything but stable at the moment,” he said. “A weaker dollar can support exports, so this could even be by design.”
While analysts caution that currency markets can turn quickly, the pound’s climb to its strongest level in more than four years underlines how global economic and political shifts are reshaping currency dynamics — and why many believe the current window favours sterling buyers.
Read more:
Pound hits four-year high against dollar, prompting calls to ‘buy now’