Pound To Dollar Week-Ahead Forecast: BoE, US Payrolls And Midterms

Pound-Dollar could extend gains if the BoE signals further tightening, while weak US payrolls may keep the Dollar under pressure.

The Pound US Dollar (GBP/USD) exchange rate struck its best levels since mid-September last week, following the Federal Reserve’s latest interest rate decision.

At the time of writing, GBP/USD was trading at around $1.3427. Up around 0.3% from the start of last week, but down from a session high of $1.3413.

DAILY RECAP:

The US Dollar (USD) initially firmed this week, with the currency benefiting from easing AI sector concerns and a sense of caution ahead of several high-impact economic events later in the session.

One such event was the Federal Reserve’s interest rate decision on Wednesday.

While the Fed’s decision to keep interest rates on hold came as little surprise, USD subsequently weakened as Chair Kevin Warsh struck a relatively cautious tone and emphasised the need for further economic data before determining the appropriate policy response.

Trade in the US Dollar was then mixed in the latter half of the week, with a stronger-than-expected third-quarter GDP print being offset by fresh AI jitters and rising uncertainty in the lead-up to the US mid-term elections.

The Pound (GBP) spent the first half of last week on the defensive, with investors seeking to limit their exposure to the currency ahead of Chancellor John Healey’s first Autumn Budget.

Anxiety regarding the Chancellor’s tax and spending plans, coupled with concerns about a lack of fiscal headroom, kept markets wary of GBP in the lead-up to Wednesday’s announcement.

However, the mood shifted decisively once the Chancellor took to the dispatch box. Financial markets reacted warmly to what proved to be a measured, unprovocative fiscal plan.

By pairing targeted relief for firms and families with a clear pledge to respect long-term borrowing rules, Healey avoided spooking debt markets. UK sovereign bond yields fell back over the remainder of the week, clearing the path for the Pound to stage a solid recovery.

Near-Term GBP/USD Forecast: UK’s Autumn Budget Poses Potential Risk to Sterling

Looking ahead, a key catalyst of movement for the Pound to US Dollar exchange rate this week will be the Bank of England’s (BoE) latest interest rate decision.

The BoE is widely expected to deliver a 25-basis-point rate hike when it concludes its November policy meeting on Thursday.

As this hike has been largely priced in by markets, any subsequent movement in the Pound will be dependent on the bank’s forward guidance.

Should policymakers indicate that further rate hikes remain on the table, Sterling could see its recovery gathering fresh momentum.

Meanwhile, the spotlight for USD investors will be on the latest US non-farm payroll figures as well as the US mid-term elections.

This could expose the US Dollar to further pressure if another lacklustre payrolls print dents the odds of the Fed delivering a rate hike in December, or if Republican loss of the House and Senate is seen as undermining US President Donald Trump’s economic agenda.

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