Pound To Dollar Price Forecast: Falling UK Borrowing Costs Support GBP

The Pound-Dollar rate could extend gains if risk appetite stays firm, while lower UK borrowing costs may continue to support Sterling.

The Pound US Dollar (GBP/USD) exchange rate rallied on Thursday as UK bond yields eased in the wake of the Autumn Budget.

At the time of writing, GBP/USD was trading at $1.3370, up around 0.3% on the day.

DAILY RECAP:

The Pound (GBP) moved higher on Thursday as markets continued to assess the implications of Chancellor John Healey’s first Autumn Budget.

Healey’s fiscal plans largely reassured bond investors, with the Chancellor keeping to the government’s fiscal rules and avoiding measures that might unsettle markets.

The response helped drive down UK borrowing costs, with the 10-year gilt yield falling to a five-week low. The decline in yields provided a boost to Sterling.

Meanwhile, the US Dollar (USD) softened on Thursday, with USD initially struggling in the wake of the Federal Reserve’s interest rate decision on Wednesday night. Following the bank’s rate hold, markets slightly trimmed bets on a December interest rate hike.

Strong US economic data then failed to aid the ‘Greenback’. American GDP accelerated more than expected in the third quarter, rising from 2.2% to 3.4% – above forecasts for 3.2%.

However, a risk-on market mood dampened demand for the safe-haven US Dollar. Markets took encouragement from reports of renewed efforts to secure peace in the Middle East, as a letter from US Vice President JD Vance to Iranian security chief Mohsen Rezaei was said to have been ‘received well’ by Tehran. The reports fuelled hopes that the two sides could return to negotiations.

Near-Term GBP/USD Forecast: Risk Appetite in Focus

Looking ahead, market-moving UK and US economic data is thin on the ground on Friday, potentially leaving the Pound to US Dollar exchange rate to trade on market risk dynamics.

If a broadly risk-on mood prevails, the increasingly risk-sensitive Pound could tick higher against the safe-haven US Dollar. Conversely, a souring mood could see GBP/USD stumble.

Events in the Middle East could determine the market mood, along with movement in the stock market.

At the same time, Sterling could continue to attract support if UK borrowing costs remain on their downward trajectory.

Our currency coverage draws on live market data, official economic releases and published bank research.