FX.co ★ Pound Climbs 7.5% vs Dollar in 2025

The British pound reached a trading rate of $1.34, representing a 7.5% increase against the US dollar in 2025, marking its most significant annual rise since it surged 9.5% in 2017. This increase in sterling value was influenced by differing expectations regarding interest rate cuts by the Bank of England and the Federal Reserve for 2026, alongside a relatively stable Autumn budget that alleviated some pressure on the currency during the latter half of the year. Throughout 2025, the Bank of England reduced borrowing rates on four occasions; however, policymakers showed a division in opinion and indicated that the already slow pace of rate cuts might decelerate even further. In contrast, in the United States, investors anticipated additional rate reductions in 2026 amid indications of a cooling labor market. Nonetheless, domestic political issues and stagnant economic growth in the UK moderated sterling's gains. Conversely, the pound depreciated by over 5% against the euro, falling to 87.2 pence, marking its largest annual decline against the euro since 2020.