Pound to Dollar Price Forecast: GBP May Rebound as USD Nears Peak

Modified: Monday, 3 November 2025 07:00 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Price Forecast: GBP May Rebound as USD Nears Peak

The Pound-to-Dollar exchange rate (GBP/USD) fell sharply this week as diverging central bank expectations and renewed fiscal anxiety dragged on Sterling sentiment.

At the time of writing, GBP/USD was trading around $1.3140, having rebounded modestly from six-month lows near $1.3100 earlier in the week.

Mounting concerns over UK fundamentals combined with a firmer US Dollar following the latest Federal Reserve rate decision, keeping the pair under sustained pressure.

The Federal Reserve delivered another 25-basis-point rate cut, bringing the benchmark rate to 4.00%, in line with market expectations.

However, Fed Chair Jerome Powell tempered hopes of further near-term easing, stressing that another cut in December was “not a foregone conclusion.”

Two regional Fed Presidents also voiced opposition to additional cuts, prompting traders to trim bets on further policy moves.

Markets now price roughly a 65% chance of another reduction in December — down from more than 90% prior to the meeting — a recalibration that underpinned Dollar strength.

Nordea observed: “The Fed has become increasingly concerned about the growing downside risks to the US labour market. Demographic trends lead us to be less concerned about further deterioration in the US labour market than the Fed currently appears to be.”

Adding to the uncertainty, the ongoing US government shutdown has deprived investors of fresh economic data, keeping sentiment fragile.

Morgan Stanley noted: “Our economists have flagged that risks have shifted toward fewer Fed cuts. A slower pace of rate cuts (or the possibility that the Fed is effectively done cutting) would delay the point at which USD carry becomes less punitive.”

While ING acknowledged near-term support for the Dollar, it doubts the sustainability of the move: “The dollar enjoyed a second round of support yesterday as Powell's relatively hawkish press conference continued to resonate with data-starved markets. But the conditions for another big leg higher in USD aren't there, in our view.”

The Pound (GBP) suffered fresh losses amid intensifying speculation that the Bank of England could join the global easing cycle at its upcoming November policy meeting.

Fiscal worries added further weight, with markets increasingly concerned that Chancellor Rachel Reeves’s forthcoming budget could tighten spending and increase taxes to offset a growing fiscal deficit.

Danske Bank expects a rate cut next month, commenting: “We expect the Bank of England (BoE) to cut the Bank Rate by 25bp to 3.75% but we recognise it is a close call. We see a clear, although narrow, path to a 5-4 decision for cut.”

Credit Agricole echoed this uncertainty: “While next week’s decision could be as close as August’s, any skip would lend a hand to the soon-to-be-oversold GBP.”

GBP/USD Forecast: Dollar Strength Near a Peak?

Despite Sterling’s recent losses, several major banks see scope for a medium-term rebound as US rate support fades.

ING maintains a 12-month GBP/USD forecast of 1.36, citing expectations that the Dollar will gradually weaken once the Fed’s cutting cycle progresses.

Credit Agricole is slightly more conservative, projecting 1.34 over the same horizon, noting that “Dollar strength is likely to fade as a notable Pound recovery takes shape.”

For now, however, GBP/USD remains vulnerable to policy headlines — with next week’s BoE decision and evolving US rate expectations poised to determine whether Sterling can find its footing or extend its recent slide.

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TAGS: Pound Dollar Forecasts