GBP/USD Forecast: Pound Falls Below Scotiabank’s Consolidation Range
Scotiabank sees risk of a deeper Pound decline as technical support gives way, while MUFG argues that the Bank of England still offers Sterling support.
The Pound to Dollar exchange rate fell to $1.3367 on Friday, down 0.66% from Thursday’s close, slipping below the area where Scotiabank had suggested the currency might stabilise.
The bank’s morning assessment allowed for trading around 1.3375-1.3425, but warned that further losses could expose 1.3275-1.3325.
That lower area is a conditional technical projection, with no fixed date attached.
The retreat challenges MUFG’s more constructive assessment of Sterling after the Bank of England’s rate rise, while stronger US employment figures have complicated the argument for a less aggressive Federal Reserve.
Both banks published before Friday’s payroll release.
A recovery that has lost its technical footing
Scotiabank’s Shaun Osborne and Eric Theoret describe a deterioration that began before the US jobs figures:
“Sterling losses through short-term support at 1.3455 yesterday drove the pound lower, as we expected.”
“But losses extended a little more than the technical set up suggested was likely and weakness through the low 1.34 area undermine the more positive technical picture for the GBP that had been developing.”
Their note still labelled the short-term outlook neutral, rather than calling for an uninterrupted decline.
“Spot may consolidate around 1.3375/1.3425 congestion in the short-term. But more losses could point to a drop back to 1.3275/1.3325.”
Friday afternoon’s quote is just below that consolidation band, putting the downside warning into sharper focus without establishing that the lower area must be reached.
A recovery towards $1.34 would bring Sterling back into the bank’s suggested range, but would still leave it below the support lost on Thursday.
Why MUFG still sees UK interest rates helping Sterling
The BoE raised Bank Rate to 4% on Thursday, with eight members backing a quarter-point increase and Catherine Mann preferring half a point.
For MUFG’s senior currency analyst Lee Hardman, the message about subsequent decisions mattered as much as that expected increase:
“UK yields have held up better than in other major economies supported by the hawkish message from the BoE signalling that at least one more hike is likely in the current tightening cycle. We had expected more cautious policy guidance from the BoE pushing back against expectations for more aggressive rate hikes but that did not materialise.”
MUFG continues to expect another increase in February 2027, while acknowledging a greater risk of a December move.
That reinforces the uncertainty over how soon the BoE will raise rates again, rather than guaranteeing a particular path.
Hardman’s broader case rests on several UK developments:
“The GBP has recently been supported by growing optimism over stronger UK growth, higher UK yields and fiscal concerns becoming a bigger market issue in the euro area than in the UK.”
However, MUFG also identifies the weakness in relying on those relatively attractive returns:
“One downside risk for the GBP would be a deeper sell-off for AI stocks and tightening of financial conditions given the GBP’s role as more of a high yielding G10 currency.”
When investors reduce risk, the extra income available on Sterling assets may offer insufficient compensation for the possibility of currency losses.
That allows the BoE to be more inclined to tighten while the Pound still falls against the Dollar.
Stronger US hiring complicates the case for Dollar weakness
Friday’s official US employment report showed 165,000 additional jobs in October, well above the 70,000 consensus recorded in Scotiabank’s morning calendar.
Upward revisions also added 84,000 jobs to August and September combined.
Our reading is that this firmer hiring picture makes it harder to argue that a weakening economy already requires the Fed to abandon further tightening.
It does not settle the effect of the latest equity losses, which occurred after the period covered by those employment figures.
MUFG’s pre-release analysis set out a reason why the anticipated December hike might still be delayed:
“If financial conditions continue to tighten it could make it less likely that the Fed will hike again in December as planned thereby adding to downside risks for the US dollar.”
The same equity weakness can therefore support immediate demand for Dollars while threatening future US investment and interest-rate support.
What this means for GBP/USD
For now, the immediate price test is whether Sterling can regain Scotiabank’s 1.3375-1.3425 band rather than extend its losses towards the low $1.33s.
UniCredit’s separate monthly forecasts put GBP/USD at 1.33 at its three quarter-end horizons from December 2026 to June 2027, close to that lower technical area.
Those projections, published on 5 November using data updated the previous day, do not confirm that Scotiabank’s short-term scenario will occur.
MUFG’s case for Sterling strength into year-end also faces a less obvious risk from cheaper energy:
“If oil prices remain at much lower levels, reflecting perhaps progress towards a US-Iran deal following the US mid-term elections, the BoE may be more inclined to hold off on hiking rates again as soon as next month.”
Lower fuel costs could help UK households while delaying the extra interest-rate support that Pound bulls hope will revive the rally.
