Pound to Dollar Forecast: GBP Recovers Despite Surging Energy Prices

Modified: Thursday, 29 October 2026 08:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP Recovers Despite Surging Energy Prices

The Pound to Dollar exchange rate (GBP/USD) recovered above 1.3300 after falling to 10-day lows near 1.3270, as the Dollar surrendered some of its gains despite renewed energy-market concerns.

Chancellor John Healey's Budget had little immediate impact on Sterling, leaving global risk appetite and the Federal Reserve's interest-rate guidance as the main drivers of the pair.

GBP/USD Forecasts: Attempt to Recover from 10-Day Low

The Pound to Dollar (GBP/USD) exchange rate dipped to 10-day lows near 1.3270 on Wednesday before a recovery to just above 1.3300. The dollar drew support from a slide in risk appetite following a fresh increase in energy prices, although the US currency retreated from its best levels.

There are strong expectations that the Federal Reserve will hold interest rates at 4.00% with markets watching rhetoric closely. Without clear guidance, equity market developments may have a greater impact.

Marc Chandler, chief market strategist at Bannockburn Global Forex commented; "with (Fed chair Kevin) Warsh's dislike for forward guidance, that means there's not going to be a strong pushback against market expectations, which are solidly for a December rate hike."

According to Scotiabank and dollar is vulnerable to losses and added on GBP/USD; “A rebound back above 1.3300/10 resistance should trigger a recovery towards 1.3330/6”0.

The UK budget had only limited impact with global developments dominating the Pound.

Energy prices will continue to be a key market focus. Brent crude is trading at the highest level for close to 6 months while UK natural gas prices are set to post a fifth successive weekly advance to trade at the highest level since late 2022.

There was little drama surrounding the budget with Chancellor Healey announcing a raft of minor measures designed to underpin consumers and bolster business confidence.

Berenberg Senior UK economist Andrew Wishart, commented; "The market seems to be very happy with it, because the increase in inflation that's driving up debt servicing costs should be temporary. And also the giveaway to households is time-limited and partly offset by that higher tax on bank profits. So we can be fairly confident that deficit reduction will get back on track in 2027 to 28."

The 2027 GDP growth forecast, however, was lowered to 1.0% from 1.6% in March higher energy prices will cause notable strains.

Berenberg’s Wishart added; "But to be honest, the big questions really will come in the spending review and how the government will fund that next year. And that will either require some more serious cuts to non-priority areas, or an increase in tax."

According to ABN Amro, the outlook is relatively positive; “Despite facing the same challenges that many of its global counterparts are experiencing – surging bond yields, prolonged inflation, and fiscal tightening – the UK economy has been remarkably resilient this year.”

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TAGS: Pound Dollar Forecasts