Pound to Dollar Forecast: Weak UK Data and Tax Fears Sink GBP

Modified: Sunday, 12 October 2025 21:45 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: Weak UK Data and Tax Fears Sink GBP

The Pound to Dollar exchange rate (GBP/USD) slumped to two-month lows near 1.3280 on Thursday as fragile UK fundamentals and firm dollar demand combined to drive renewed selling pressure. The pair traded close to 1.3300 on Friday in subdued European trade.

GBP/USD Forecasts: Sterling Remains “Unloved”

Sterling sentiment remains fragile heading into the Autumn Budget.

Swissquote Bank’s Ipek Ozkardeskaya noted; “Sterling remains very much unloved heading into the Autumn Budget.”

UoB warned of deeper losses ahead; “This time around, the price action has resulted in a marked increase in downward momentum, and the next technical target is at 1.3200. On the upside, the ‘strong resistance’ level is now at 1.3410 instead of 1.3465.”

Critical support remains near 1.3140.

UK data continued to highlight subdued demand.

According to the British Retail Consortium (BRC), total retail footfall fell 1.8% in the year to September following a 0.4% decline in August.

BRC CEO Helen Dickinson said; “Customers put the brakes on non-essential spending… fashion and full-price big-ticket items were held back by lower consumer confidence.”

The latest KPMG and REC jobs survey reported the slowest wage growth in more than four years.

REC’s Neil Carberry commented; “Pay trends remain subdued where pay is set by the market rather than the Government. This suggests that pay growth should not be a drag on the Bank of England’s upcoming interest rate decision.”

The combination of looming tax hikes, weak consumption and slowing pay growth could prompt the Bank of England to cut rates more quickly — a scenario that would likely weigh further on Sterling.

ING observed; “It’s becoming increasingly clear that this week’s dollar rally – which was initially spurred by events in Japan and France – is turning into a broader rethink of the consensus short-dollar trade.”

It added; “The dollar can consolidate some gains today, but remains at risk of corrections in our view.”

Markets still price a 95% chance of an October rate cut and around an 80% likelihood of two cuts by the end of 2025.

However, the continuing US government shutdown has disrupted data releases, raising the risk that the Federal Reserve could make a policy error and unsettle markets.

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TAGS: Pound Dollar Forecasts