Pound to Dollar Weekly Forecast: Could GBP Break Below 1.30 in October?

Modified: Monday, 5 October 2026 06:31 BST - Written by James Fuller

STORY LINK Pound to Dollar Weekly Forecast: Could GBP Break Below 1.30 in October?

The Pound to Dollar exchange rate (GBP/USD) recovered towards 1.3240 after falling to three-month lows below 1.3200, with weaker US employment data reducing expectations of another Federal Reserve rate hike in October.

Pound Sterling nevertheless faces a potentially decisive month as markets reassess aggressive Bank of England tightening expectations and prepare for Chancellor John Healey's crucial October Budget.

GBP/USD Forecasts: Huge month of fundamentals

Lloyds Bank sees an increased risk that the Pound to Dollar (GBP/USD) exchange rate will slide below the 1.3000 level.

GBP/USD dipped to 3-month lows below 1.32 during the week, but was resilient and recovered to 1.3240 following weaker than expected US jobs data which curbed expectations of an October Fed rate hike..

UK interest rate and fiscal fundamentals will be crucial over the next few weeks with geo-political developments also a key element.

Markets are pricing in four Bank of England rate hikes over the next year.

According to Lloyds; “Energy persistence is dragging the BoE to a November hike (the MPC has to stay in touch with the market), but we doubt there is a need to deliver market pricing in full given already restrictive financial conditions. That leaves GBP’s yield support exposed, particularly against a US curve that is more realistically priced. GBP/USD is likely to remain heavy. A break down through 1.3000 could see the move lower accelerate.”

Rabobank commented on market pricing; “In our view, however, this is too aggressive. This implies very little scope for GBP to find support even if the BoE does hike rates in the coming months. Indeed, there is a strong chance that GBP could give up ground if the market pares back its expectations for BoE policy tightening into next year.”

UK fiscal policy will also be a key element with the US mid-term elections also coming into focus.

Standard Chartered commented; “The government’s decision to adjust the pension triple lock from 2030 is an early indication of greater willingness to tackle longer-term spending pressures, reinforcing Chancellor Healey’s commitment to fiscal discipline and meeting the fiscal rules.

It added; “A credible Budget should help contain pressure on UK government bond yields and support GBP. Any fiscal slippage remains a key risk.”

Federal Reserve policy will also be a key element. Markets consider that the most likely outcome is three further rate hikes by the middle of 2027, although markets are now not expecting a further hike in October.

MUFG commented on mixed indicators; “We are sceptical that the US economy requires that degree of monetary tightening. Economic activity has shown resilience but there remain signs of a two-tier economy that highlights fragility. While equity markets remain close to all-time highs and the AI investment boom continues, consumer confidence plunged in September, remarkably hitting a level worse than during covid and the worst since 2014.”

Scotiabank added; “High profile members of the FOMC including NY Fed President Williams are already pushing back on markets and softening the extent of tightening currently priced in.”

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TAGS: Pound Dollar Forecasts