Pound-to-Dollar Forecast: GBP/USD Jumps to 5-Week Best

Modified: Thursday, 4 December 2025 07:31 BST - Written by Frank Davies

STORY LINK Pound-to-Dollar Forecast: GBP/USD Jumps to 5-Week Best

The Pound to Dollar exchange rate (GBP/USD) surged to 1.3310 as weak US data and renewed dovish Fed expectations triggered another bout of dollar selling.

Sentiment around the Pound Sterling has improved post-budget, with markets eyeing a possible move toward 1.3370.

The next direction hinges on whether Fed-chair speculation deepens the dollar’s slide into next week’s meeting.

GBP/USD Forecasts: 5-Week Highs

The Pound to Dollar rate has posted strong gains on Wednesday with a surge to 5-week highs around 1.3310.

The dollar has been subjected to renewed selling while Pound confidence has strengthened.

After a decisive break, the next GBP/USD target is likely to be in the 1.3370 area.

Scotiabank considers that background Pound confidence has continued to improve after the budget; “Sentiment appears to be dominating as the GBP extends its post-budget rally with the options market reveals a significant moderation in the premium for protection against downside risk.”

The dollar was undermined by weak data and on-going speculation over a more dovish Federal Reserve.

Scotiabank commented on the dollar index; “the DXY is pinned back to recent lows and—considering the generally reliable weak seasonal trends we see emerge in December—looks prone to more losses.”

According to Danske Bank; “as we move into 2026, structural forces still look USD-negative, with narrowing real-rate differentials, rising Fed independence risks, and potential political preference for a softer USD.”

US ADP jobs data recorded a 32,000 decline in private payrolls for November compared with consensus forecasts of an increase near 5,000 while October’s increase was revised to 47,000 from 42,000.

ADP chief economist Dr. Nela Richardson commented; “Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment.”

She added; “And while November's slowdown was broad-based, it was led by a pullback among small businesses."

Markets are now pricing in close to a 90% chance that the Fed will cut interest rates at the December meeting.

From a medium-term perspective, markets are increasingly confident that Hassett will be nominated by President Tump to be the next Fed Chair, although there has been no official announcement.

ING commented; “Given perceptions of Hassett as quite dovish, the dollar is a little weaker across the board and risk assets have turned gently bid. This could be the dominant theme until next week's FOMC meeting.”

Man Group chief market strategist Kristina Hooper noted the potential for a “shadow Chair” operating until May when Powell’s term expires.

She added; "This could complicate the Fed’s ability to communicate monetary policy and could create some confusion for markets at a time when they need clarity.”

ING did note the potential for dollar buying on dips if Fed fears are misplaced; “Speaking to buy-side customers recently, some were looking to fade dollar weakness on the Hassett announcement effect, ultimately betting that he would not be as dovish or be allowed to be as dovish given the nature of the FOMC voting process.”

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TAGS: Pound Dollar Forecasts