Pound-to-Dollar Forecast: Could Budget Trigger a Sterling Sell-Off?

Modified: Wednesday, 28 October 2026 07:01 BST - Written by James Fuller

STORY LINK Pound-to-Dollar Forecast: Could Budget Trigger a Sterling Sell-Off?

The Pound to US Dollar (GBP/USD) exchange rate edged lower on Tuesday as uncertainty surrounding Wednesday's Autumn Budget kept investors cautious towards Sterling.

At the time of writing, GBP/USD was trading at approximately $1.3307, slightly below Tuesday's opening levels.

The Pound (GBP) struggled to attract support as markets awaited Chancellor John Healey's first Autumn Budget, with concerns over the UK's public finances continuing to weigh on sentiment.

Healey has offered few details about his tax and spending plans, although he has indicated that the Budget will reflect Prime Minister Andy Burnham's commitment to easing financial pressures on households and businesses.

Delivering meaningful support without unsettling financial markets could prove difficult.

Rising government borrowing costs and weaker-than-expected tax receipts have reduced the Chancellor's fiscal headroom, limiting his ability to introduce new measures while remaining within the government's fiscal rules.

The reaction of UK bond markets will be particularly important, given the recent volatility in gilt yields and concerns about the sustainability of government borrowing.

Investors will be looking for evidence that Healey can support economic growth without substantially increasing the Treasury's financing requirements.

A Budget that reassures bond investors could help Sterling recover, while any suggestion of greater borrowing or weaker fiscal discipline risks triggering renewed selling pressure.

With Wednesday's announcement approaching, GBP traders appeared reluctant to take significant positions, leaving the currency struggling for direction.

The US Dollar (USD), meanwhile, traded within a relatively narrow range on Tuesday as an improvement in technology stocks helped stabilise sentiment towards US assets.

The recovery followed news that artificial intelligence developer Anthropic had filed for an initial public offering (IPO).

The announcement helped restore some confidence in the AI sector after its recent sell-off, supporting US equities and encouraging a more positive mood across financial markets.

Although stronger risk appetite can reduce demand for the safe-haven Dollar, the recovery in US technology shares also helped ease concerns about the outlook for the American economy.

Fresh economic data provided additional support for the 'Greenback'.

September's US durable goods orders exceeded expectations, reaching their highest level in five months and suggesting that demand for manufactured goods remained resilient.

The stronger figures offered some reassurance ahead of Wednesday's Federal Reserve interest rate decision, helping the Dollar maintain its position against Sterling.

Near-Term GBP/USD Forecast: UK Budget and Fed Decision Could Test $1.33

Wednesday could bring increased volatility for the Pound to US Dollar exchange rate, with the UK's Autumn Budget and the Federal Reserve's latest monetary policy announcement both scheduled.

For Sterling, the immediate focus will be Chancellor John Healey's tax and spending plans.

Investors will be assessing whether the government can provide additional support for households and businesses while maintaining confidence in the public finances.

A credible fiscal package that avoids a substantial increase in borrowing could provide some relief for the Pound, potentially allowing GBP/USD to recover towards $1.3350.

However, measures that raise concerns about government debt or trigger another increase in gilt yields could put Sterling under renewed pressure.

A sustained break below $1.3300 would leave the pairing vulnerable to further losses.

Across the Atlantic, the Federal Reserve is widely expected to leave interest rates unchanged at its October meeting.

With the decision largely anticipated, attention will turn to the accompanying statement and comments from Fed Chair Kevin Warsh.

A hawkish message suggesting policymakers remain open to another interest rate increase in December could strengthen the Dollar and add to pressure on GBP/USD.

Conversely, signs that the Fed is becoming more concerned about slowing economic growth or softer employment conditions could reduce expectations for further tightening and weaken the US currency.

With both announcements capable of shifting interest rate and borrowing expectations, GBP/USD may struggle to establish a clear direction until markets have assessed their implications.

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TAGS: Pound Dollar Forecasts