The Pound-Dollar could stay supported if the UK Budget reassures markets, while hawkish Federal Reserve guidance may revive demand for the Greenback.
The Pound US Dollar (GBP/USD) exchange rate rallied to a one-month high last week as robust UK macroeconomic data bolstered Bank of England (BoE) rate hike bets.
At the time of writing, GBP/USD was trading at around $1.3375. Up around 0.4% from the start of last week, but down from a session high of $1.3413.
Pound to Dollar (GBP/USD): 1.337685 (-0.20%)
Dollar to Yen (USD/JPY): 156.84405 (+0.21%)
DAILY RECAP:
The Pound (GBP) advanced against most of its currency peers last week amid a flurry of high-impact UK economic releases.
Support initially stemmed from an encouraging UK employment update, which showed an unexpected dip in the jobless rate over the three months to August.
Sterling received an additional boost from September’s consumer price data, where headline inflation accelerated from 3.1% to 3.5%, its highest level since October 2025.
Together, this data further cemented market expectations that the BoE will raise interest rates following its November meeting, while also encouraging GBP investors to price in more rate hikes in the following months.
However, the Pound struggled to preserve these gains in the second half of the week as a steep contraction in September retail sales growth soured sentiment, ultimately stealing the limelight from an unexpectedly robust UK services PMI.
The US Dollar (USD) initially faced notable selling pressure last week, with improving risk appetite sapping safe-haven demand.
Political uncertainty also contributed to the cautious mood surrounding the ‘Greenback’ as USD investors increasingly weigh the possibility of the Democrats regaining control of Congress and the implications this could have for President Donald Trump’s economic agenda.
However, the US Dollar was able to claw back some of these losses later in the week after a surge in oil prices unsettled markets and drove fresh safe-haven flows.
Near-Term GBP/USD Forecast: UK’s Autumn Budget Poses Potential Risk to Sterling
Turning to this week, there are a couple of major events on the economic calendar that may infuse volatility into the Pound to US Dollar exchange rate.
In the UK, the spotlight will be on Chancellor John Healey as he prepares to unveil his first Autumn Budget on Wednesday.
Healey will need to persuade GBP investors that his fiscal plans will generate growth without unsettling public finances, as the failure to do so could trigger fresh turmoil in the UK bond market and pull Sterling lower.
Meanwhile, the Federal Reserve will also deliver its latest interest rate decision on Wednesday.
No policy changes are expected this month, but USD investors will be on the lookout for any hints as to what the Fed might do in December, with any hawkish signals potentially helping to revive USD demand.
Also of note to USD investors will be the latest US GDP figures, which may lift the US Dollar if growth accelerated in the third quarter in line with forecasts.
Our currency coverage draws on live market data, official economic releases and published bank research.
