GBP/USD Forecast: Pound Sterling Weaker as Dollar Gains Despite Shutdown

Modified: Monday, 6 October 2025 21:45 BST - Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Sterling Weaker as Dollar Gains Despite Shutdown

The Pound to US Dollar exchange rate (GBP/USD) weakened on Monday despite an ongoing US government shutdown, and an uptick in Federal Reserve interest rate cut expectations.

At the time of writing, GBP/USD was trading at approximately $1.3433, down roughly 0.4% from the start of Monday’s session.

The US Dollar (USD) strengthened against several major peers on Monday, despite ongoing domestic uncertainty.

The US government remained in shutdown during the session, with reports suggesting that widespread lay-offs could follow if the funding bill is not agreed upon soon.

At the same time, the CME FedWatch Tool indicated a sharp rise in interest rate cut expectations, with markets now pricing in a 95% probability of a cut in October and an 85% chance of another in December.

Ordinarily, such dovish expectations might weigh on the ‘Greenback’, but the currency instead managed to find support.

Weakness in both the Japanese Yen (JPY) and the Euro (EUR) at the start of the week allowed the USD to gain ground, helping it firm against a range of major counterparts despite the challenging domestic backdrop.

The Pound (GBP) traded without a clear sense of direction on Monday, fluctuating against the majority of its peers in the absence of any significant UK data releases.

A mixed market mood left Sterling moving unevenly through the session, dipping against certain rivals while recording modest gains elsewhere.

With little in the way of domestic drivers to influence sentiment, GBP investors adopted a cautious stance ahead of a scheduled speech from Bank of England (BoE) Governor Andrew Bailey later in the evening.

Should Bailey deliver hawkish commentary or indicate that UK interest rates will remain higher for longer, the Pound could find renewed support in the wake of his remarks.

Looking ahead to Tuesday’s European session, movement in the Pound US Dollar (GBP/USD) exchange rate is expected to hinge on a series of scheduled Federal Reserve speeches.

If Fed policymakers strike a hawkish tone and signal that interest rates could remain elevated for longer, the US Dollar may strengthen as investors adjust their expectations.

Equally, any dovish remarks reinforcing the likelihood of rate cuts could see the ‘Greenback’ come under renewed pressure.

As for the Pound, a continued lack of UK economic releases means Sterling is likely to remain directionless, with traders instead taking cues from wider market trends.

In the absence of fresh domestic drivers, GBP exchange rates could remain volatile, fluctuating in response to changes in global risk appetite and external developments throughout Tuesday’s European trading session.

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TAGS: Pound Dollar Forecasts