Pound to Dollar Forecast: GBP/USD Consolidates Below 4-Week Highs

Modified: Friday, 28 November 2025 10:31 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: GBP/USD Consolidates Below 4-Week Highs

The Pound to Dollar exchange rate (GBP/USD) eased back toward 1.3220 after touching four-week highs just below 1.3270, with thin holiday trading muting follow-through.

Bond yields edged higher again, highlighting lingering fiscal doubts even as markets welcomed Wednesday’s improvement in risk sentiment.

A sustained break above 1.32 would improve the outlook, while a slip back below could reopen talk of 1.30.

GBP/USD Forecasts: Consolidation

The Pound to Dollar rate hit 4-week highs just below 1.3270 in Asia on Thursday before a retreat to around 1.3220.

There was a positive market reaction on Wednesday with gains for the Pound, bonds and equities.

Bonds did, however, lose some ground on Thursday with an increase in yields amid reservations over the long-term outlook.

The Pound may be dependent on dollar losses to make headway, but a sustained move above 1.3200 would still improve the underlying GBP/USD outlook.

A dip back below 1.32 would increase chatter of a fresh move to 1.30.

Trading volumes will be subdued on Thursday with US markets closed for the Thanksgiving Holiday and there will also be an early close on Friday.

ING commented; “The dollar remains somewhat expensive against G10 currencies, but given the size of this week's correction and limited room for further dovish repricing before some more data comes in, we are switching to a neutral bias on USD for this Thanksgiving holiday.”

The UK budget and Federal Reserve speculation will continue to be key elements.

Although there was some initial relief for Sterling markets, underlying doubts remain prominent.

Moody’s Analytics senior economist Andrew Hunter was relatively positive on the outlook; “Markets appear to have welcomed the increase in fiscal headroom, and the chancellor’s announcement that the government will move to only one fiscal assessment by the OBR each year should also help restore some predictability to U.K. fiscal policy.”

Rabobank remains uneasy over the outlook; “Structural pressures of sluggish growth, the transition to net zero, rising welfare and ageing costs, a record tax burden and politicians appearing unable to address these are still there.”

It added; “Against that backdrop, there is little reason to expect the UK’s risk premium in its bond market to dissipate anytime soon. If anything, the longer fiscal consolidation is postponed, the greater the risk of a sharper adjustment later.”

The NIESR also pointed to underlying difficulties; “Today’s budget locks in a high-tax, high-debt steady state in a world of low productivity growth and higher interest rates. Even the historically large tax share of GDP now planned is only just enough to stabilise – not reduce – a debt ratio stuck around 100 per cent of GDP for the foreseeable future.”

Bank of England policy will also be a key element for the Pound.

Markets are still pricing in over an 80% chance of a rate cut at the December meeting.

Rabobank now expects a rate cut at the December meeting, having previously backed the next move in February, especially with some impact from the budget on lowering inflation.

According to the bank; “While fiscal consolidation is backloaded rather than frontloaded, markets have accepted it, and consequently we now incorporate a December cut into our forecast.”

Traders will also be watching US developments closely. Given the latest shift in expectations, markets are now pricing in around an 85% chance of a further cut at the December meeting.

MUFG commented; “Core PCE inflation now appears set to undershoot the Fed’s year end forecast providing further justification for dovish FOMC participants to push for another rate cut in December.

Developments surrounding the nomination of the next Fed Chair will also continue to be watched closely. Further indications that Hassett could be nominated would tend to unsettle the dollar.

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TAGS: Pound Dollar Forecasts