By: Fiona Cincotta, Senior Market Analyst
Sterling ended 2025 with a gain of 6.5 percent against the U.S. dollar, marking its best year since 2017. That performance, however, coincided with one of the weakest years for the dollar in modern history. When currencies move sharply, the driver matters as much as the direction. In this case, the pound’s advance reflects vulnerability elsewhere rather than resilience in the UK economy.
Fiona Cincotta, StoneX Senior Market Analyst, examines how relative currency weakness shaped GBP performance and what that implies for the outlook ahead.
The U.S. dollar fell roughly 10 percent in 2025, its worst annual performance since the late 1970s. That decline created a powerful tailwind for many currencies, including sterling. As Cincotta notes, “This wasn't really about pound strength. Instead, we saw U.S. dollar weakness.” When the base currency weakens broadly, relative gains can mask underlying fragilities.
GBP’s performance looks less convincing when viewed outside the dollar cross. The pound lost ground against both the euro and the Swiss franc, signaling a lack of broad-based demand. Cincotta highlights that this “highlight[s] a lack of broad GBP strength” despite the headline rally. Without stronger domestic growth or policy support, sterling’s upside remains closely tied to whether the dollar resumes its decline.
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--- Written by Frédéric Guétin, StoneX TV Producer
--- Expert: Fiona Cincotta, StoneX Senior Market Analyst
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