Pound to Dollar Forecast: GBP Rebounds on USD Pullback, Fundamentals Still Fragile

Modified: Friday, 14 November 2025 11:00 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Rebounds on USD Pullback, Fundamentals Still Fragile

The Pound to Dollar exchange rate (GBP/USD) slipped below 1.3100 on Wednesday following a weak UK GDP print and persistent political uncertainty, but Sterling later recovered as the dollar softened.

By Thursday afternoon, GBP/USD was trading around 1.3145 (-0.06%), supported by a US dollar pullback despite sustained bearish pressure on the Pound.

GBP/USD Forecasts: Dollar Softens, But UK Fundamentals Still a Drag

Analysts at UoB noted that a break above 1.3165 would signal that “the current mild downward pressure has eased,” while ING maintains a year-end GBP/USD target of 1.34 as dollar momentum fades into December.

The latest GDP figures painted a bleak picture. UK output contracted 0.1% in September versus expectations of flat growth. The third quarter posted only 0.1% growth against the 0.2% consensus, with manufacturing hit hard by the JLR cyberattack and only marginal gains in construction and services.

Quilter’s Lindsay James said; “This paints a picture of an economy that started 2025 strongly but is now badly losing steam just as the Chancellor prepares for a pivotal Autumn Budget.”

ING added; “This complicates the job of Chancellor Rachel Reeves ahead of the Budget, where she’ll try to reassure markets with fiscally prudent measures, whilst trying not to dampen growth excessively or stoke up inflation.”

Reeves U-Turn Raises Fiscal Questions

Fresh reports that Chancellor Rachel Reeves has dropped plans for income tax hikes added further uncertainty. According to ING, Sterling came under renewed pressure because earlier gains in gilts had been based on expectations that income tax rises would deliver the necessary fiscal tightening without stoking inflation, creating room for the BoE to cut rates in December.

ING warned: “It’s unclear how Reeves will fill the £30bn fiscal hole without touching income tax. VAT hikes would be inflationary, risking hawkish BoE repricing. Freezing tax thresholds is one alternative but markets will scrutinise the details.”

BoE December Cut Bets Strengthen

Signs of slowing growth and deteriorating labour-market conditions have strengthened expectations of a December BoE rate cut.
MUFG said; “Slowing growth momentum and weakness in the labour market are encouraging market expectations for active BoE easing.”

RSM UK’s Thomas Pugh added; “If we didn’t think a December rate cut was nailed on already, this morning’s data almost certainly makes it so.”

Political risk adds another layer. Prime Minister Starmer’s approval ratings remain poor, and MUFG warned that the May 2025 local elections could be a decisive test, with further Pound weakness likely if markets begin to price in a meaningful political risk premium.

Dollar Weakens as US Shutdown Ends, But Fed Uncertainty Persists

With the US government now reopened, markets will refocus on delayed economic data, particularly jobs reports.
Market pricing for a December Fed cut has cooled to around 55%, with Fed officials increasingly divided.

Scotiabank noted: “WSJ Fed-watcher Timiraos reports Fed officials are fracturing over a December cut after hawks pushed for a pause after last month’s decision.”

Upcoming labour data will be crucial in determining whether December easing remains viable.
As ING put it; “We think markets are underestimating the downside risks for the labour market, US front-end rates and – by extension – the dollar into year-end.”

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TAGS: Pound Dollar Forecasts