Pound to Dollar Forecast: GBP/USD Pressured as Budget Angst Hits Sterling

Modified: Monday, 17 November 2025 08:00 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP/USD Pressured as Budget Angst Hits Sterling

Sterling struggled to gain ground last week, with the Pound to Dollar exchange rate (GBP/USD) holding near 1.31, after the UK government’s abrupt reversal on income tax plans reignited fiscal concerns.

Analysts warn that the budget turbulence and weak GDP print add to the growing case for further BoE rate cuts, weighing on the Pound even as Nordea sees the pair rising to 1.41 by 2026.

GBP/USD Forecasts: Budget angst

Nordea forecasts that the Pound to Dollar (GBP/USD) exchange rate will strengthen to 1.41 by the end of 2026 as the dollar comes under pressure.

Mizuho also expects dollar vulnerability, but expects GBP/USD will be held to 1.33 at the end of next year.

GBP/USD was unable to make headway during the week and traded just above 1.3100.

UK fiscal uncertainty increased dramatically on Friday. After weeks of preparation and suggesting that income tax would be increased in the budget, there was a sudden U-turn with unofficial briefings that it would not be increased.

There were fresh jitters in the bond market with UK yields moving sharply higher which also unsettled the Pound.

MUFG commented; “we still expect the package of fiscal tightening measures to put a dampener on economic growth in the UK and create more room for the BoE to lower rates further.”

UK GDP data was also weaker than expected with the third-quarter growth held to 0.1%.

JP Morgan commented; “Yet more poor data out of the UK, admittedly some of it was tainted by the JLR debacle but this does not provide comfort enough to offset the mood which is starting to get pretty sour again on UK prospects.”

It added; “alongside some questions arising of how safe Starmer and Reeves will be post-delivery, there is enough out there to keep us short GBP on the crosses as we lead into the Budget event.

According to ING; “Governor Andrew Bailey sounds like he will vote for a cut in December after he has seen a couple more CPI prints and the Autumn Budget. Our team expects further BoE cuts in the first and second quarters next year to set the policy rate near neutral at 3.25% next summer.”

ING added; “Even though the market already prices the BoE’s terminal rate at 3.25%, we expect the easing to weigh on sterling as hedging costs dip and deposit rates drop into the middle of the G10 pack.”

Fed policy will remain a key element for the dollar.

According to Mizuho; “A new Fed Chair in May 2026 make it hard to be too bullish on the USD as you will be fighting against the current administration’s (direct or indirect) agenda.”

Nordea also pointed to potential turmoil surrounding the Fed; “All of these events introduce political and institutional uncertainty that could trigger significant dollar selling in the first half of next year.

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TAGS: Pound Dollar Forecasts