Pound to Dollar Forecast: Analysts Warns of Rate Cut Risk

Modified: Wednesday, 15 October 2025 09:30 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: Analysts Warns of Rate Cut Risk

The Pound to Dollar exchange rate (GBP/USD) fell to 10-week lows near 1.3270 on Tuesday as soft UK jobs data and renewed US-China trade tensions combined to sap risk appetite.

Foreign exchange analysts warn that slowing wage growth could bring an earlier-than-expected Bank of England rate cut, with ING flagging February as the most likely timing.

GBP/USD Forecasts: Slides to 10-Week Lows

The latest UK jobs data triggered some fresh speculation that a further Bank of England rate cut could be delivered this year while the Pound was also undermined by a fresh bout of risk aversion amid increased US-China trade tensions.

The Pound to Dollar (GBP/USD) exchange rate dipped to 10-week lows just below 1.3270 after Tuesday’s European open as risk-sensitive currencies came under wider pressure.

According to UoB; “downward momentum may lead to a breach of the rising trendline support at 1.3270; it is too early to tell if the August low of 1.3143 will be revisited.”

Markets were also monitoring global risk conditions with equity markets losing ground amid further concerns over global trade wars.

Interactive Investor head of investment Victoria Scholar commented; “Trade tensions between the US and China are escalating as both countries started collecting port fees on shipping firms, pushing up costs on both sides. This has dashed global market sentiment with a sea of red across Europe after yesterday’s market reprieve.”

Traders also remain wary over the US threat to impose 100% tariffs on China from November 1st.

There are expectations that a deal will be agreed by then, but tensions could increase further in the meantime.

MUFG commented; “There is a higher risk now that trade tensions between China and the US will escalate further in the near-term before de-escalating again.”

According to ING; “Once data resumes, we expect evidence of worsening employment to take the dollar back to early October levels, and then down to fresh lows by year-end. But this week may not give us much sense of direction again, and a few extra bits of bullish dollar momentum are probably on the cards in the near term.”

Domestically, the UK unemployment rate increased to a 4-year high of 4.8% in the three months to August from 4.7% previously.

Provisional data recorded a 10,000 decline in payrolls for September, but August data was revised to show a 10,000 increase compared with the flash decline of 8,000.

Headline annual earnings growth increased to 5.0% in the year to August from a revised 4.8%, but this was driven by stronger growth in public-sector wages.

ING commented; “The slight fly in the ointment is public sector pay, which was hot in the latest month. But this reflects the current expansive fiscal stance, and the upcoming budget should make clear that this won’t be repeated next year.”

Within the data, private-sector wages growth slowed to a 4-year low of 4.4%.

ING expects some relief within the Bank of England (BoE); “Given wage growth has consistently overshot in recent years, simply seeing these numbers materialise would help ease concerns about upside inflation risks.”

At this stage, it is backing a February rate cut, but considers that the risks of a December cut are under-priced which will curb Pound support.

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TAGS: Pound Dollar Forecasts