Pound to Dollar Price Forecast: GBP/USD Drops on UK Budget Risks

Modified: Wednesday, 29 October 2025 07:00 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Price Forecast: GBP/USD Drops on UK Budget Risks

The Pound-to-Dollar exchange rate (GBP/USD) slipped sharply on Tuesday as investors turned cautious ahead of the UK government’s upcoming autumn budget.

At the time of writing, GBP/USD was trading at 1.32815, down around 0.44% from Tuesday’s opening levels.

The Pound (GBP) came under renewed pressure after the Office for Budget Responsibility (OBR) warned that the UK faces a £20bn fiscal shortfall, largely due to weak productivity and slowing growth.

The findings intensified speculation that Chancellor Rachel Reeves may be forced to introduce tax increases in next month’s budget to shore up the nation’s finances.

The prospect of tighter fiscal measures dampened market sentiment, with investors wary that higher taxes could weigh on household spending and slow the UK’s already fragile recovery.

As a result, Sterling struggled to find support through the European session, with the Pound weakening against a firming US Dollar.

The Greenback (USD) held steady ahead of the Federal Reserve’s interest rate decision on Wednesday, buoyed by safe-haven demand as global markets adopted a more cautious tone.

Investors widely expect the Fed to announce a 25-basis-point rate cut, but uncertainty over future policy guidance kept USD trading volatile.

GBP/USD Forecast: Fed Decision to Steer Mid-Week Direction

Looking ahead, attention will turn squarely to the Federal Reserve’s rate announcement, which is likely to set the tone for mid-week market movement.

If Chair Jerome Powell signals that further rate cuts are on the table before year-end, the Dollar may weaken, potentially giving GBP/USD scope to rebound.

However, a more measured tone — or hints that this could mark the final cut of the cycle — could strengthen the Greenback, pushing the pair lower still.

With the UK data calendar empty until the end of the week, the Pound will remain heavily influenced by global sentiment and speculation over both Fed policy and UK fiscal plans in the run-up to the November budget.

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TAGS: Pound Dollar Forecasts