British Pound to Euro, Dollar Forecast: BoE Dovish Hold Fuels December Rate-Cut Bets

Modified: Friday, 7 November 2025 08:45 BST - Written by David Woodsmith

STORY LINK British Pound to Euro, Dollar Forecast: BoE Dovish Hold Fuels December Rate-Cut Bets

The Pound Sterling (GBP) remained under pressure against the Euro (EUR) and US Dollar (USD) after the Bank of England’s dovish hold, though a softer dollar helped GBP/USD recover above 1.3100 following weaker US jobs data.

Traders now see a growing likelihood of a December rate cut, keeping Sterling vulnerable despite the dollar’s retreat.

GBP/USD Forecasts: Dollar Retreat Cushions Pound

The Pound recovery stalled after the Bank of England decision to hold rates at 4.00% was offset by a dovish vote split and statement.

The Pound to Dollar exchange rate (GBP/USD) was, however, able to secure a further net recovery to just above 1.3100 as the dollar lost ground after weak US jobs data.

UoB commented; “if GBP breaks above 1.3120, it would indicate that the weakness in GBP which started more than two weeks ago has come to an end.”

Credit Agricole has cut its end-2025 GBP/USD forecast to 1.34 from 1.37.

The Pound to Euro (GBP/EUR) exchange rate was little changed close to 1.1360.

According to MUFG; “Overall, the developments should remain supportive for our long EUR/GBP trade recommendation.” (GBP/EUR losses)

It maintains a target of 1.1240.

The BoE decision met consensus forecasts with rates held at 4.00%, but there was a surprise with the vote.

There was a 5-4 split for the decision as Dhingra, Taylor, Ramsden and Breedon voted for a 25 basis-point cut to 3.75%.

Governor Bailey was in the majority voting for no change in rates, but he noted that the risk of persistent inflation had fallen and that the overall risks were more balanced. The overall statement was broadly dovish.

MUFG commented; “It fits with our view for a dovish hold today that sets up a rate cut at the next MPC meeting in December.”

According to the statement; “the recent data suggested that the risk from greater inflation persistence had become less pronounced, and the risk to medium-term inflation from weaker demand more apparent, such that overall the risks were now more balanced. But more evidence was needed on both, and different members placed different weights on these risks.”

The bank is now more confident that the inflation rate has peaked, but Bailey still noted the risk of persistent pressures.

It added that; “If progress on disinflation continued, Bank Rate was likely to continue on a gradual downward path.”

The narrow vote and position of Governor Bailey will increase speculation of a move at the December meeting, especially if there is a net tightening of policy in the November budget.

According to ING; “Barring any major upsets in the two inflation releases between now and December’s meeting – and assuming no surprises in the Autumn Budget – then it sounds like Bailey will vote for a cut at that meeting. That’s our base case – and we’re more convinced of that following the latest decision.”

SocGen Head Of Corporate Research Fx And Rates Kenneth Broux commented; "There's certainly a dovish tone, for example they are talking about the upside risk to inflation decreasing, and that along with the voting split gives it a dovish feel. December is certainly in play, but not a done deal."

He added; "It's going to be tough for the pound.”

Pepperstone Senior Research Strategist Michael Brown noted; "(There is) also a bit more of an explicit easing bias to the statement, having got rid of this reference to gradual and careful, and instead explicitly saying if there is further progress on disinflation then we are going to continue cutting rates."

He added; "This is a Bank of England that clearly wants to continue lowering rates."

Zara Nokes, Global Market Analyst at JP Morgan was more cautious; “the bottom line is that headline inflation is running at 3.8% – almost twice the BoE’s target.”

She added; “The balance of risks could shift next year if large near-term tax hikes are announced at the Autumn budget. But until there is more meaningful progress on bringing inflation down, the Bank must exercise a high degree of caution in lowering rates.”

According to ING, rate cuts are priced in which should help cushion the Pound; “Pricing for the 2026 Bank of England (BoE) easing cycle appears to be about right, with the terminal rate currently priced near 3.25%. As such, we don’t think sterling needs to fall much further on the BoE story.”

It did, however, add; “The budget is a major sterling event risk. Any further aggressive or less aggressive fiscal tightening is likely to be negative for the pound, with the latter scenario being more perilous.”

As far as the US data is concerned, Challenger announced that job cuts increased to just over 153,000 for October from below 56,000 in October 2024.

According to Challenger; “AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes. Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market.”

Labour-market fears hurt the dollar and markets were also wary over tariff developments with the Supreme Court, in an initial hearing, appearing sceptical that reciprocal tariffs could be justified.

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 Pound Euro Forecasts