Pound to Dollar Forecast: BoE Rate Hike Looms, US Midterms Threaten Volatility

Modified: Monday, 2 November 2026 06:31 BST - Written by James Fuller

STORY LINK Pound to Dollar Forecast: BoE Rate Hike Looms, US Midterms Threaten Volatility

The Pound to Dollar exchange rate (GBP/USD) has held close to 1.3400 as Sterling's high-yield appeal continues to provide support despite renewed weakness in global equities.

The Pound now faces a series of important tests, including this week's Bank of England decision and US midterm elections, while concerns over an AI-driven stock-market correction threaten to undermine the Dollar's traditional safe-haven appeal.

GBP/USD Forecasts: Multiple Risk Events

Danske Bank has a 1-month Pound to Dollar (GBP/USD) exchange rate forecast of 1.30.

BNP Paribas is forecasting GBP/USD will strengthen to 1.43 by the end of 2027.

During the week, GBP/USD posted net gains to just below 1.34 after hitting 2-week highs above this level. The Pound continued to trade with a strong tone in global markets with high yields continuing to provide net support despite a slide in risk appetite.

The dollar is often seen as a safe-haven when risk conditions deteriorate, but sustained pressure on tech stocks could change the equation. Deutsche Bank, however, added "the risk-off properties of the dollar cannot be taken for granted in the event of an AI-driven correction in the market."

BNP Paribas sees scope for Pound support; “GBP/USD would see relative support underpinned by a modest fiscal risk premium under the new Labour government, and resilient growth.”

It added; “The economy has so far weathered both the energy price shock and domestic political volatility.”

Bank of America expressed some caution over the near-term outlook; “Our trading bias has been to fade extreme UK pessimism but sentiment has arguably turned too optimistic.”

Monetary policy will inevitably be one key element. There are strong expectations that the BoE will hike rates to 4.00% at this week’s policy meeting.

According to ING; “We expect a 7-2 vote in favour of a rate hike, the first since the Iran War. There's still scant evidence of second-round effects on inflation, but rising natural gas prices make it hard not to act. We'd expect the Bank to stay non-committal on its next steps given the hefty uncertainty, though we expect a follow-up hike in February.”

The Federal Reserve held interest rates at 4.00% at the latest policy meeting, in line with consensus forecasts. There was a 10-2 vote for the decision with Hammack and Governor Cook voting for a further hike.

US mid-term elections will be held this week with strong expectations that the Democrats will win control of the House while there is the potential for a tight Senate battle..

Danske Bank commented; “We think a Democratic sweep in the midterms and a following decline in perceived political uncertainty could drive a modest rally in broad USD.”

ING notes the risk to equity markets; “A Democratic sweep is trading around 68% in prediction markets, and that could be seen as slightly negative for the US dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts