Pound Sterling to Dollar Forecast: GBP Struggles Despite FTSE Record, Softer Yields

Modified: Thursday, 9 October 2025 08:45 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: GBP Struggles Despite FTSE Record, Softer Yields

The Pound to Dollar exchange rate (GBP/USD) struggled to gain traction on Wednesday, holding near 1.3420 as firm dollar demand and caution ahead of the Fed minutes kept Sterling on the defensive.

GBP/USD Forecasts: Pound Sterling Unable to Make Headway

The British Pound Sterling found support below 1.3400 against the U.S. Dollar on Tuesday, but failed to make much headway and there was a fresh test of support below 1.3400 on Wednesday before trading around 1.3420.

The dollar has maintained a firm underlying tone in global markets despite lower bond yields with the Pound unable to make wider headway.

UoB commented; “The price action has resulted in a tentative buildup in downward momentum. From here, we expect GBP to edge lower, but currently, it is unclear whether there is sufficient momentum for it to reach last month’s low, near 1.3325.”

Key GBP/USD resistance remains in the 1.3520 area.

On Wednesday, there were further strong gains for the UK FTSE 100 index to a fresh record high.

There was some relief that the FCA announcement on compensation for mis-selling of car-finance agreements were less severe than feared. JP Morgan commented; "Overall, we see the FCA's proposals as confirming our view that any further motor finance provisions for UK banks are likely to be limited.”

Stronger equities, however, failed to provide a significant Pound support while the surge in gold to a fresh record high triggered further jitters over underlying global fundamentals.

Traders are also fretting over the risk of an AI bubble.

According to Bank of America; “GBP remains beholden to 26th Budget which will continue to weigh on sentiment.”

Robert Farago, head of strategic asset allocation at Hargreaves Lansdown added; "Sterling will be a barometer of Rachel Reeves's ability to balance the need for fiscal prudence, economic growth and honouring political pledges."

The US data flow remains disrupted by the government shutdown with no immediate sign that the deadlock will be broken.

At this stage, markets are pricing in over an 80% chance of two further Fed rate cuts by the end of 2025.

According to Rabobank senior forex strategist Jane Foley; "While we see risk of the greenback facing potential headwinds next year if Fed independence is questioned, we currently see scope for short-covering in favour of the U.S. dollar based on the high amount of Fed easing that is already in the price, and given the backdrop of geopolitical tensions."

The Federal Reserve minutes from September’s policy meeting will be released later Wednesday with the extent of splits in the committee watched closely.

According to ING; “Today’s FOMC minutes from the September meeting can test the dollar’s bullish momentum.”

Commerzbank's FX analyst Antje Praefcke commented; “Apart from the fact that the next two labor market reports are likely to be distorted by the delayed collection of data and the layoffs of government employees, they are still much more important for the dollar than what will be in the minutes tonight."

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts