Pound to Dollar Forecast: GBP/USD Stalls at 1.35 Despite Hawkish BoE

Modified: Sunday, 8 November 2026 19:31 BST - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP/USD Stalls at 1.35 Despite Hawkish BoE

The Pound to Dollar exchange rate (GBP/USD) struggled to break above 1.3500 on Thursday despite a hawkish Bank of England rate hike and continued fallout from the Democrats' sweeping US midterm election victory.

Pound Sterling remained firm near seven-week highs, but a modest Dollar recovery and expectations of further Federal Reserve tightening limited gains ahead of Friday's US employment report.

GBP/USD Forecasts: Blocked at 1.35

The Pound to Dollar (GBP/USD) exchange rate briefly re-tested 7-week highs at 1.3500 on Thursday before a retreat to near 1.3460.

The Pound held firm after the Bank of England (BoE) rate decision with the currency index close to 10-year highs while the dollar recovered some ground after posting sharp losses in immediate reaction to the Democrats gaining control of both Houses of Congress.

UoB now sees the potential for GBP/USD gains to 1.3530.

Scotiabank is more cautious on the near-term view; “Two rejections of the 1.35 area over the past 24 hours sets up a minor double top on the intraday chart. The GBP could ease back to the low 1.34 area on a break under the “neckline” trigger at 1.3455.”

It did add; “Broader trends still look bullish, however, and moderate weakness is likely to draw interest from momentum traders and trend followers.”

The BoE increased rates by 25 basis points to 4.00%, in line with consensus forecasts and the first increase for three years. There was an 8-1 vote as Mann voted for a larger 50 basis-point hike.

The bank warned that the risk of second-round inflation effects had increased and expects inflation will reach 5% early next year. It also warned that further rate hikes were likely unless there was a retreat in energy prices, although Governor Bailey did add that a series of hikes was not inevitable.

Markets are pricing in a 50% chance of a further move in December and three further hikes over the next 12 months.

ING commented; “we expect one further rate hike by February. A renewed spike in energy prices could bring that forward to December. However, we're still sceptical that the Bank will need to hike more than once more.”

Schroders UK Chief Economist David Rees added; “we think UK interest rates will peak at 4.25%."

The dollar outlook will also be a key element as markets ponder the seismic US political shift.

According to ING; “Poorer US data and/or a more dovish Fed remain the necessary conditions for front-end USD rates to fall more than peers, and by extension for a broader USD downturn.”

It added; Instead, data has remained broadly supportive of Fed tightening expectations.”

MUFG commented; “Leading indicators of labour demand are signalling strengthening US employment growth which if confirmed on Friday could help to provide some support for the US dollar after the recent setback.

Consensus forecasts are for an increase in non-farm payrolls of around 65,000 following the 29,000 increase for September with the unemployment rate expected to hold at 4.2%.

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TAGS: Pound Dollar Forecasts