Pound to Dollar Hits Best Exchange Rate in Five Weeks as Sterling Climbs

Modified: Friday, 23 October 2026 09:21 BST - Written by James Fuller

STORY LINK Pound to Dollar Hits Best Exchange Rate in Five Weeks as Sterling Climbs

The Pound US Dollar (GBP/USD) exchange rate briefly touched a five-week high on Thursday, with Sterling continuing to benefit from expectations that the Bank of England (BoE) will raise interest rates in November.

At the time of writing, GBP/USD was trading at $1.3407, having eased from an earlier peak of $1.3418 but remaining marginally higher on the day.

The Pound (GBP) retained support from stronger-than-expected UK economic data released earlier in the week.

Tuesday's employment figures revealed an unexpected decline in unemployment, suggesting the labour market remains more resilient than economists had anticipated.

Wednesday's consumer price index (CPI) provided further encouragement for Sterling, with inflation accelerating more sharply than forecast.

Together, the releases strengthened expectations that the Bank of England will raise interest rates at its November policy meeting, while also keeping the prospect of additional tightening in 2027 firmly in view.

The possibility of higher UK borrowing costs helped Sterling maintain its recent gains, although the Pound struggled to extend its advance beyond Thursday's five-week high.

Investors remained cautious ahead of another round of UK economic releases, which could provide a clearer indication of how households and businesses are coping with persistent inflation.

The US Dollar (USD), meanwhile, came under pressure as declining US Treasury yields reduced support for the American currency.

Lower bond yields made Dollar-denominated assets relatively less attractive, contributing to the 'Greenback's' weaker performance against Sterling.

Political uncertainty ahead of the US midterm elections also weighed on sentiment towards the Dollar.

The contrasting monetary policy outlooks in the UK and US provided another source of support for GBP/USD.

While the Bank of England is widely expected to raise interest rates in November, the Federal Reserve is generally anticipated to leave borrowing costs unchanged at its next meeting.

This divergence has helped Sterling recover against the Dollar, although further gains may depend on whether incoming UK data continues to support expectations of tighter monetary policy.

Near-Term GBP/USD Forecast: Weak UK Data Could Put $1.34 Under Pressure

The Pound to US Dollar exchange rate could face renewed pressure as investors assess the latest UK retail sales figures and preliminary October purchasing managers' index (PMI) surveys.

September's retail sales figures showed volumes contracting by 0.4%, a sharper decline than the 0.1% fall economists had anticipated.

The disappointing reading raised concerns that elevated household costs and higher borrowing rates are beginning to weigh more heavily on consumer spending.

Attention will now turn to October's PMI figures, which are expected to indicate slower activity across both the manufacturing and services sectors.

Further evidence of weakening economic momentum could temper expectations for an extended Bank of England tightening cycle, potentially limiting Sterling's recent recovery.

For GBP/USD, the $1.3400 level remains an important near-term reference point following Thursday's advance to $1.3418.

A sustained move above the recent high could encourage further Sterling buying, while disappointing UK activity figures may prompt a retreat below $1.3400.

Across the Atlantic, the latest US PMI surveys could also influence trading if they reveal a slowdown in private-sector activity.

The University of Michigan's final October consumer sentiment index will provide another indication of household confidence.

A weaker reading could reinforce expectations that the Federal Reserve will leave interest rates unchanged, potentially limiting any recovery in the US Dollar.

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TAGS: Pound Dollar Forecasts