Pound to Dollar Forecast: Shutdown Stalemate Keeps GBP/USD Below 1.35

Modified: Sunday, 5 October 2025 22:45 BST - Written by Ben Hughes

STORY LINK Pound to Dollar Forecast: Shutdown Stalemate Keeps GBP/USD Below 1.35

The Pound to Dollar exchange rate (GBP/USD) dipped sharply to lows near 1.3400 in US trading on Thursday before a recovery to 1.3460 on Friday.

The GBP/USD outlook remains muted after a volatile week, with analysts from UoB and Scotiabank seeing little momentum for a breakout beyond 1.35 amid UK growth and fiscal headwinds.

The Pound Sterling drew some support from further gains in equities with the FTSE 100 index at a fresh record high.

Traders noted that the potential for sharp currency moves on Friday had been robbed by the postponement of the latest US employment report due to the US government shutdown.

UoB commented; “there has been no clear increase in upward momentum, and we continue to expect GBP to trade between 1.3360 and 1.3525 for now.”

According to Scotiabank; “We look to a near-term range bound between 1.34 and 1.35.”

There is a risk of further narrow ranges in the very short term.

Scotiabank commented; “FX investors have been whipsawed by US political developments this year and may just sit on their hands until the US government shutdown situation becomes clearer.”

MUFG noted the risk of an extended shutdown, especially given Administration threats to dismiss government employees and target Democrat projects.

It added; “if the White House follows through on the threats it will increase notably the risk of both sides digging in and prolonging the shutdown.”

There are still underlying reservations surrounding the UK fundamentals.

The UK PMI services-sector index was revised down to a 5-month low of 50.8 for September from the flash reading of 51.9 and following the August figure of 54.2.

The data will trigger fresh reservations surrounding the UK growth outlook which will also increase reservations surrounding the fiscal outlook.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank commented; "Sterling looks set to consolidate near 1.35, but conviction is weaker. UK fiscal dynamics are front and centre as the Autumn Budget looms."

She added; "Higher borrowing costs are narrowing fiscal headroom, raising the risk of tax hikes, spending cuts — or both. That prospect doesn’t exactly bolster appetite for the pound."

Rabobank also noted potential vulnerability; “In addition to inflation concerns, the UK fundamental backdrop is characterised by high debt, slow growth and a weakened government. While the UK has neither the highest public debt of its peers, nor the most unstable government, the UK’s current account deficit can accentuate the pound’s sensitivity to a worsening in fundamental news.”

According to Scotiabank; “For the UK, sentiment remains critical as markets eye the government’s fiscal plans ahead of the November 26 budget.”

It notes the possibility of a bounce; “The options market is still pricing a relatively high premium for protection against GBP weakness, offering some scope for sentiment driven gains if Chancellor Reeves can maintain support.”

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TAGS: Pound Dollar Forecasts