British Pound to Dollar Forecast: GBP/USD Weighed by Dovish BoE Expectations

Modified: Wednesday, 17 December 2025 18:01 BST - Written by Ben Hughes

STORY LINK British Pound to Dollar Forecast: GBP/USD Weighed by Dovish BoE Expectations

The Pound to US Dollar exchange rate (GBP/USD) retreated on Wednesday, sliding to its lowest level in a week after softer-than-expected UK inflation data fuelled expectations of a Bank of England (BoE) interest rate cut.

At the time of writing, GBP/USD was trading around $1.3351, down roughly 0.5% on the day.

The Pound (GBP) came under notable pressure after the UK’s latest consumer price index revealed a sharper slowdown in inflation than markets had anticipated.

Headline CPI fell from 3.6% in October to 3.2% in November, undershooting forecasts for a more modest easing to 3.5%. Core inflation also surprised on the downside, slipping from 3.4% to 3.2% instead of holding steady.

The softer inflation data reinforced conviction that the Bank of England will cut interest rates at Thursday’s policy meeting. It also strengthened bets that policymakers may pursue a more aggressive easing cycle in early 2026, prompting Sterling to weaken as rate cut expectations were repriced.

The US Dollar (USD), meanwhile, found some support on Wednesday as markets modestly scaled back expectations for near-term Federal Reserve rate cuts.

Although recent US labour market indicators continue to point to cooling conditions, November’s non-farm payrolls report proved less negative than feared. This led to a slight recalibration of Fed policy expectations, helping the Dollar regain some ground.

Additional support for the ‘Greenback’ came from softer risk appetite, with investors seeking safety amid rising tensions between the US and Venezuela.

GBP/USD Exchange Rate Forecast: Dovish BoE Cut to Pressure the Pound?

Attention now turns to the Bank of England’s interest rate decision on Thursday, which is set to be the key driver for GBP/USD.

While a rate cut is widely expected and largely priced in, Sterling’s reaction will depend heavily on the BoE’s guidance. A clearly dovish tone — signalling scope for multiple rate cuts in 2026 — could leave the Pound vulnerable to renewed selling pressure.

In the US, focus will shift to the latest consumer price index. Evidence that inflation remains sticky may help underpin the US Dollar, while signs of a clearer slowdown in price growth could sap USD demand and add volatility to the pairing.

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TAGS: Pound Dollar Forecasts