British Pound to Dollar Forecast: GBP Steady with Fed Cut Odds Above 85%

Modified: Wednesday, 3 December 2025 09:31 BST - Written by David Woodsmith

STORY LINK British Pound to Dollar Forecast: GBP Steady with Fed Cut Odds Above 85%

The Pound to Dollar exchange rate (GBP/USD) hovered near 1.3200 as the dollar regained some ground and Sterling struggled to build momentum.

Markets remain heavily priced for a December Fed cut, with upcoming ADP and ISM data likely to shape expectations.

Medium-term projections still favour a softer dollar, though BoE easing could temper Pound Sterling gains.

GBP/USD Forecasts: Stall Above 1.32

The Pound to Dollar (GBP/USD) exchange rate tested support below 1.3200 on Tuesday before trading close to this level as the dollar recouped some ground while the Pound was unable to make headway.

ING expects renewed dollar losses; “We think the conditions for USD weakening persist after yesterday’s rollercoaster ride.”

JP Morgan forecasts GBP/USD gains to 1.37 by March as the dollar loses ground.

On a near-term view, markets are waiting for ADP jobs and ISM services-sector releases on Wednesday.

ING commented; “Yesterday’s ISM manufacturing didn’t move pricing for a December cut as expected: prices paid were a bit higher than expected, but the headline index print was soft. We expect that the remainder of the week will validate the market’s dovish pricing for next week’s Fed meeting.”

Markets are still pricing in over an 85% chance of a Fed rate cut next week.

According to ANZ head of G3 economics Brian Martin; "I really do think the Fed needs to cut interest rates, and not just cut rates in December, but follow through with further cuts next year.”

The medium-term Fed outlook will also be a key element for markets, especially with on-going speculation that Kevin Hassett will be nominated to be the next Fed Chair and act as a “shadow Chair” over the next few months.

Scotiabank noted that markets are reluctant to price in rates dipping below 3% and added; “It will be hard to persuade some policymakers of the merits of that argument in the near-term but leadership lobbying to lower the Fed funds target rate significantly without clear justification would raise concerns about political influence on the FOMC, representing a clear threat to USD stability.”

As far as the UK economy is concerned, the OECD has raised its 2026 forecast for GDP growth to 1.2% from 1% and sees growth of 1.3% in 2027.

The organisation is still wary over the risk of sticky inflation.

According to the OECD; "Elevated inflation expectations and potential second-round effects from increases in payroll taxes and the minimum wage, as well as from high food inflation, constitute an upside risk to prices.”

It called for the Bank of England (BoE) to maintain a cautious stance on rate cuts, but traders are pricing in around a 90% chance of a cut this month.

MUFG noted relatively hawkish comments from MPC member Greene on Monday, but added; “with only one additional member likely required to vote for cut to get a majority on the MPC, we still believe the BoE is on track to cut rates, and encourage a weaker pound heading into year end.”

According to Scotiabank; “The outlook for relative central bank policy remains supportive for the GBP, as we expect the BoE to ease less than the Fed.”

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TAGS: Pound Dollar Forecasts