Pound Sterling to Dollar Forecast: Fiscal Jitters Keep GBP/USD Under Pressure

Published: Friday, 10 October 2025 09:30 BST - Written by Tim Boyer

STORY LINK Pound Sterling to Dollar Forecast: Fiscal Jitters Keep GBP/USD Under Pressure

The Pound to Dollar (GBP/USD) exchange rate fell to two-week lows under 1.3350 on Thursday before edging back to 1.3385. Dollar strength and fiscal caution in both London and Washington continue to limit Sterling’s recovery prospects.

GBP/USD Forecasts: Fiscal Worries Keep Pressure on Sterling

The dollar held firm as confidence in UK fundamentals stayed fragile, with traders wary of rising debt-servicing costs and the late-November budget.

Key GBP/USD support remains at 1.3325, with a sustained break exposing 1.3150.

UoB commented; “As long as GBP holds below the ‘strong resistance’ at 1.3465, the downside bias toward 1.3325 remains intact.”

Bank of England policymaker Catherine Mann struck a hawkish tone, warning that inflation expectations remain inconsistent with target levels.

She said; “High inflation itself is behind scarring, income uncertainty, and weak consumption growth. Therefore, monetary policy needs to continue to focus on reducing inflation to achieve the environment of price stability.”

Despite Mann’s remarks, the Pound struggled to benefit amid persistent fiscal concerns.

Commerzbank cautioned; “Stability is also too important for the foreign exchange market to ignore disputes within Western governments over fiscal policy. This is likely to occupy us in the coming months.”

It added; “The fact that the options market is becoming increasingly nervous about the upcoming budget of the British government illustrates this impressively."

The Federal Reserve’s September minutes had limited impact, revealing some internal splits, with a few members preferring to hold rates at 4.50%.

However, most officials still viewed further easing this year as appropriate.

MUFG noted; “Assuming the flow of economic data continues as we have seen, a rate cut on 29th October seems most likely and that prospect remains close to fully priced.”

It added; “That said, perhaps just one bad inflation print would be enough to see the FOMC change tack and quickly decide to hold off cutting. But the government shutdown means we may not get any top-tier jobs or inflation data before that meeting, so a rate cut would most likely still be delivered.”

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TAGS: Pound Dollar Forecasts