Pound to Dollar Forecast: GBP Rises as Fed Decision Weakens USD

Modified: Friday, 30 October 2026 08:16 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: GBP Rises as Fed Decision Weakens USD

The Pound to Dollar exchange rate (GBP/USD) climbed towards 1.3370 as Sterling benefited from a calm market reaction to Chancellor John Healey's Budget and a softer US Dollar following the Federal Reserve's latest decision.

The Fed held rates at 4.00%, but Chair Kevin Warsh's relatively measured comments tempered expectations of aggressive tightening, allowing the Pound to extend its recovery from support near 1.3300.

GBP/USD Forecasts: Pound Secures Net Gains

The Pound to Dollar (GBP/USD) exchange rate found support close to 1.3300 on Thursday and advanced to around 1.3370 after the US open.

The Pound held firm after Wednesday’s UK budget and the dollar edged lower after the latest Federal Reserve policy decision.

BNP Paribas commented; "We think today’s budget means the pound can continue to benefit from the theme of reduced UK political uncertainty versus elsewhere. We stay long sterling/dollar."

According to Scotiabank; “Spot trends should turn more bullish above 1.3340 intraday.”

UoB added; “there is scope for GBP to rise to 1.3440 next.”

There are still important geo-political concerns amid elevated energy prices with Brent still trading above $110 p/b.

Rabobank commented; “Uncertainty about the Middle East conflict continues to linger over markets, as President Trump keeps the option of escalation after the midterms on the table. US officials have reportedly warned several allies in the region to prepare for potential military strikes after the US polls, and the possibility that Iran may retaliate.”

The Federal Reserve held interest rates at 4.00% at the latest policy meeting, in line with strong market expectations. There was a 10-2 vote for the decision with Cook and Hammack voting for a second successive increase.

Chair Warsh stated that the economy was not running too hot and repeated optimism that AI developments would help boost productivity and help curb inflation..

Markets are now pricing in around an 80% chance that rates will be increased in December.

According to MUFG the comments push back against expectations for more aggressive Fed rate hikes by acknowledging the recent tightening in financial conditions and stronger productivity growth. It supports our forecast that the Fed may deliver only one further hike.

It added; “While the scaling back of Fed rate hike expectations will put a dampener on the US dollar’s upward momentum, it is still deriving support from negative developments overseas including higher energy prices and heightened fiscal and political risks in the euro area.”

ING commented; “We see limited room for bearish follow-through to yesterday’s mild negative USD reaction on the Fed story alone. If anything, some positioning for a softer USD could emerge ahead of next week’s US midterms. Barring that, consolidation of the dollar’s recent gains looks more likely.”

Danske Bank added; “we think the case for further hikes remains strong, and we maintain our call for two 25bp hikes at the December and March meetings. We see risks tilted towards more than two hikes.”

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TAGS: Pound Dollar Forecasts