British Pound to Dollar Forecast: GBP/USD Holds Above 1.31 Ahead of Budget Risk

Modified: Monday, 24 November 2025 08:05 BST - Written by Tim Boyer

STORY LINK British Pound to Dollar Forecast: GBP/USD Holds Above 1.31 Ahead of Budget Risk

The Pound to Dollar exchange rate (GBP/USD) resisted a break below 1.30, but looming tax measures, BoE cuts and softer UK indicators have kept Sterling anchored near 1.31.

The dollar found modest support as markets reassessed the likelihood of a December Fed move, narrowing the immediate trading range.

Attention now turns to whether upcoming budget details or US data provide the catalyst for a breakout.

GBP/USD Forecasts: Fed Watch

After an initial wobble, RBC Capital Markets forecasts that the Pound to Dollar (GBP/USD) exchange rate will strengthen to 1.43 by the end of 2026 on dollar weakness.

Morgan Stanley sees scope for GBP/USD to strengthen to 1.36 early in 2026 before a slide to 1.29 by the end of the year as the Pound comes under pressure.

GBP/USD dipped during the week, but resisted a test of 1.30 and ended little changed just above 1.3100.

The immediate focus will be on the UK budget with expectations of tax hikes, but not an increase in income tax rates. There will be a net tightening to meet fiscal rules with the bond market watched very closely.

RBC commented; “The Budget last year was poorly received by markets and sterling considerably weakened in the weeks that followed. So far, sterling looks well-behaved going into the Budget and a series of leaks may have reduced the event risk. We think this supports cable weaker in the short-term, although one could argue we may have reached peak pessimism on the UK fiscal situation.”

There are strong expectations that the Bank of England will cut interest rates at the December meeting.

CIBC commented; “Based on weakening fundamentals, and a BoE more vigilant of downside risks to growth, we are forecasting back-to-back rate cuts from the BoE at its next two meetings in December and February, taking the base rate to 3.50%.”

Morgan Stanley expects the Pound will hit trouble next year; “with disinflation and labor market weakness both increasingly taking hold, the BoE cutting rates to and eventually below neutral sees GBP’s carry advantage eroded meaningfully.”

It added; “GBP/USD initially gains a bit to 1.36 as the weaker USD outweighs the local story, but the currency can’t defy gravity forever.”

RBC is more positive; “While high yields can work against sterling if it sparks concerns about fiscal sustainability, it also makes GBP an attractive target currency for carry trades.”

It added; “Sterling is perhaps not as unattractive as many people think even if there are reasons to look for weakness in the short-term.”

Following the delayed US jobs report and Federal Reserve minutes from October’s meeting, market expectations of a December Fed rate cut have declined further to near 30%.

Fed resistance to rate cuts would tend to support the dollar.

CIBC commented; “Given his verbiage at the October FOMC meeting, we suspect Powell would err on the side of caution and wait for the data calendar to normalize, and smooth out any of the statistical quirks that the shutdown may have caused.”

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TAGS: Pound Dollar Forecasts