Pound Sterling to Dollar Forecast: GBP/USD Rises on PMI Boost and Fed Shift

Modified: Wednesday, 3 December 2025 22:01 BST - Written by Frank Davies

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Rises on PMI Boost and Fed Shift

The Pound to US Dollar exchange rate (GBP/USD) climbed on Wednesday as markets leaned further into expectations of a more dovish Federal Reserve.

At the time of writing, the pair traded near $1.3281, roughly 0.5% higher than Wednesday’s opening levels.

The US Dollar (USD) retreated on Wednesday as speculation intensified that Kevin Hassett will be nominated to replace Jerome Powell when his term ends in May.

Investors have steadily increased their bets on a December Fed rate cut, with current pricing pointing to an 87% probability of a 25bps move.

But attention is shifting beyond the near-term decision. Markets increasingly believe the Fed could adopt a more aggressive easing stance throughout 2026, particularly if Hassett — seen as sympathetic to President Trump’s preference for looser monetary policy — becomes Chair.

Reports that interviews with other shortlisted candidates have been halted abruptly added weight to expectations of Hassett’s appointment, placing further downward pressure on the US Dollar as traders brace for a potentially faster-cutting Fed.

The Pound (GBP) found support on Wednesday after the UK’s latest services PMI was revised higher.

The November index was lifted from 50.5 to 51.3. While still below October’s 52.3, the stronger print eased concerns about the sector’s loss of momentum.

The survey also signalled a cooling in price pressures — a positive sign for the Bank of England (BoE). However, evidence of falling employment further cemented expectations that the BoE remains on course to lower interest rates again before the year’s end.

GBP/USD Forecast: Strong US Inflation to Give USD Fresh Support?

Looking ahead, the key event for the Pound to US Dollar exchange rate will be Friday’s release of the Fed’s preferred inflation measure: the core PCE price index.

If September’s reading holds at 2.9% or comes in hotter, it may temper recent dovish speculation and offer the US Dollar some relief.

Conversely, a cooler print would likely strengthen expectations of faster rate cuts in 2026 and put renewed pressure on the Dollar.

With no major UK data due, Sterling is likely to drift through the second half of the week, taking its cue from US economic releases and broader market sentiment.

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TAGS: Pound Dollar Forecasts