Pound to Dollar Short-Term Forecast: Is the BoE Cutting Cycle Back On?

Modified: Monday, 27 October 2025 09:00 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Short-Term Forecast: Is the BoE Cutting Cycle Back On?

The Pound US Dollar exchange rate (GBP/USD) struggled for traction last week, dipping to test support near 1.3300 as softer UK inflation revived talk of earlier Bank of England (BoE) easing and fiscal nerves lingered ahead of November’s Budget.

Headline CPI held at 3.8% for a third straight month versus expectations for 4.0%, while core slowed to 3.5% from 3.6%.

The downside surprise prompted markets to bring BoE cut expectations forward, with some desks flagging scope for another reduction before the end of 2025.

UBS remains constructive on the Pound over the medium term, projecting GBP/USD at 1.40 by mid-2026.

The bank acknowledges notable November 26th Budget risks, but argues much of the fiscal anxiety is already embedded: “We argue the GBP spot price also carries a fiscal risk premium, which may well diminish should the budget announcement go smoothly.”

Wells Fargo is more cautious.

It sees scope for a peak around 1.36 before a retreat to 1.30 by Q1-2027, citing earlier BoE cuts, contentious budget negotiations and elevated local political risk: “Pound underperformance can stem from earlier Bank of England rate cuts, alongside a soft commitment from U.K. policymakers to continue easing in 2026.”

Longer term, Wells Fargo expects a renewed Dollar rebound as the Fed’s easing cycle ends by H2-2026 with a still-elevated 3.25% funds rate: “We expect the greenback to rebound over the second half of 2026 and for that rebound to persist in early 2027.”

HSBC also highlights downside GBP risks from fiscal policy, but notes these are well flagged: “It would take unpleasant surprises to hit GBP hard, especially against a USD which we expect to weaken.”

GBP/USD Outlook: Budget optics vs. BoE timing

Near term, the balance of risks skews to rangebound or softer GBP/USD while markets price earlier BoE easing and fret over potential tax hikes in the Autumn Budget.

Medium term, the path will hinge on two pivots: whether the Budget removes part of the UK’s “fiscal risk premium,” and how quickly the Fed approaches the end of its cutting cycle.

A smoother UK fiscal narrative and a softer USD would support the UBS 1.40 case; stickier US exceptionalism and a firmer Dollar bias would favour the Wells Fargo glide path toward 1.30 into 2027.

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TAGS: Pound Dollar Forecasts