British Pound to Dollar Forecast: GBP/USD Supported as Budget Fear Fades

Modified: Friday, 5 December 2025 09:46 BST - Written by Frank Davies

STORY LINK British Pound to Dollar Forecast: GBP/USD Supported as Budget Fear Fades

The British Pound to Dollar exchange rate (GBP/USD) climbed to 1.3365 and held firm as post-budget relief and softer dollar sentiment underpinned the pair.

The key test now is whether Pound Sterling can break and sustain a move above 1.3400 against the US Dollar, with HSBC targeting gains toward 1.37.

Fed cut expectations remain elevated, though limited room for further near-term dollar selling could slow momentum.

GBP/USD Forecasts: Budget Risk Being Priced Out

Scotiabank commented; “The pound remains well supported as it pushes toward the upper end of a tight overnight range and threatens an extension of its recent gains to fresh highs at levels last seen in late October.”

The next key hurdle for the Pound will be whether it can break and hold above the 1.3400 area.

HSBC sees scope for GBP/USD gains to 1.37 at the end of the year.

Danske Bank analyst Kundby-Nielsen added; "What we've been seeing over the past week is some of that budget risk being priced out.”

Domestically, the UK bond market was broadly stable with the 10-year yield around 4.43%.

Scotiabank is still positive on the Pound; “Sentiment is dominating and risk reversals are surging as the options market reprices the cost of protection against GBP weakness in the aftermath of last week’s UK budget.”

Markets will now be looking to assess whether the hard data will back the case for greater optimism surrounding the UK outlook. GDP data will be released on December 12th.

US developments will continue to be watched very closely with Fed policy a key element.

Markets are continuing to price in close to a 90% chance that the Fed will cut rates next week.

Given the high degree of confidence in a cut, there may be limited scope for further short-term dollar selling ahead of next week’s decision.

The US jobs-related data was mixed as Challenger reported that US layoffs increased over 71,000 in November, an annual increase of 24%.

There was, however, a decline in jobless claims which eased fears to some extent.

Scotiabank maintains a bearish stance on the currency; “Weekly price action is shaping up to “confirm” the turn lower in the DXY from a technical point of view. Dollar seasonals are generally—but quite reliably—bearish in December.”

There is also continuing speculation that Hassett will be named as the next Fed Chair which could lead to a more dovish policy.

According to Commerzbank "A Fed rate cut next week is already priced in. "What will be decisive for the dollar, though, is whether there will be new hints regarding the direction of monetary policy in subsequent meetings."

ING expects further medium-term dollar losses; “Our view remains that data will justify two more cuts early next year, which underpins our view that the dollar won’t make a comeback even in the seasonally favourable first quarter.”

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TAGS: Pound Dollar Forecasts