Pound Sterling to Dollar Forecast: BoE Rethink After Inflation Data

Modified: Thursday, 23 October 2025 11:00 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: BoE Rethink After Inflation Data

The Pound to Dollar (GBP/USD) exchange rate fell to 1-week lows near 1.3320 after UK inflation data fuelled fresh speculation that the Bank of England could resume rate cuts this year

GBP/USD Forecasts: Slide to 1-Week Low

GBP/USD dipped to 1-week lows just below 1.3320 as the dollar held firm.

A slump in gold prices after a surge to fresh record highs helped underpin the dollar, although equity markets made gains which should provide some net support the Pound.

The huge moves across precious metals will increase the risk of a wider increase in volatility.

Commerzbank commented; “We are dealing with an absolutely exceptional year for gold."

UoB is not convinced that the Pound slide will continue; “Downward momentum has increased slightly, but rather than a continued decline, GBP is likely to edge lower within a lower range of 1.3310/1.3435.”

JP Morgan sees scope for losses to at least 1.3200 unless the pair can rebreak back above 1.3475.

Transatlantic interest rate expectations will remain a key driver of exchange rates.

Markets are still expecting Fed rate cuts in October and December with a further cut early next year.

ING commented; “the dollar could have extended gains up to current levels on the back of US sentiment stabilisation, but a further USD rally from here will be harder to justify unless markets find reasons to price out one of the three Fed cuts expected by March.

With analysts divided over whether the Bank of England delivers another cut this year, the next few weeks could see sharp GBP/USD swings. For readers with currency purchase needs or upcoming transfers, it may be prudent to track rate movements closely — see the latest live comparisons for guidance on timing and provider options.

The headline UK inflation rate held at 3.8% for September compared with consensus forecasts of an increase to 4.0% while the core rate declined slightly to 3.5% from 3.6% and compared with expectations of a slight increase to 3.7%.

Food prices declined 0.2% on the month with the annual increase slowing to 4.5% from 5.1%.

The goods inflation rate increased slightly to 2.9% from 2.8% with the services-sector rate unchanged at 4.7%.

Following the data, there was a shift in expectations surrounding Bank of England policy.

Markets have priced in a cut fully by February compared with March previously and there has been fresh speculation that there could be a move this year.

Matthew Ryan, head of market strategy at Ebury noted conflicting pressures; “The MPC is stuck between a rock and a hard place. The cooling in Britain’s jobs market is screaming out for further reductions in the base rate, but high inflation warrants a need for caution.”

He added; “We think that most officials will probably need to see more evidence that inflation has indeed peaked, but today’s data does at least mark a step in the right direction.”

ING commented; “Markets are pricing in 10bp of easing for December, which leaves ample room for potential dovish repricing hitting the pound in the coming weeks – even if our official call still narrowly favours February for the next cut.”

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