Modified: Monday, 8 December 2025 17:31 BST

– Written by


Ben Hughes

STORY LINK GBP to USD Forecast: Pound Sterling Drifts on Leadership Uncertainty, Fed Watch

The Pound to US Dollar exchange rate (GBP/USD) drifted on Monday, slipping back from last week’s six-week high as renewed political unrest in Westminster weighed on Sterling and traders shifted their focus to the Federal Reserve’s upcoming policy decision.

At the time of writing, GBP/USD was trading at $1.3316, largely unchanged on the session.

The Pound (GBP) struggled for traction on Monday as fresh political anxiety limited Sterling’s upside.

Reports surfaced that Labour Together — a prominent Labour thinktank — has been polling members on potential leadership alternatives. The survey reportedly includes Prime Minister Keir Starmer and eight senior Labour figures, fuelling speculation that a leadership challenge could emerge in May 2026 should Labour underperform in the local elections.

Political stability remains a critical currency driver, and renewed whispers of leadership turbulence added an unwelcome layer of uncertainty. With questions creeping back into the UK’s political outlook, traders were reluctant to push the Pound meaningfully higher.

The US Dollar (USD) held steady on Monday as investors adopted a cautious stance ahead of Wednesday’s Federal Reserve interest rate decision.

While markets still widely expect a rate cut, subtle pre-decision positioning helped to keep the Dollar supported. A modest rise in US Treasury yields also offered the ‘Greenback’ some protection, as traders pared back the most aggressive easing bets and reassessed how quickly the Fed might loosen policy.

This slight recalibration was enough to prevent further Dollar losses, leaving USD largely rangebound as markets await clearer direction from the central bank.

GBP/USD Exchange Rate Outlook: Pre-Fed Jobs Data to Shape USD Direction

Looking ahead, UK focus will fall on Bank of England (BoE) Governor Andrew Bailey’s speech on Tuesday. With the final interest rate decision of 2025 looming, investors will scrutinise his comments for any shift toward a more dovish tone. Signals that a rate cut is likely next week — or that further easing could follow — may weigh heavily on Sterling.

For the US Dollar, incoming labour market data could be decisive ahead of the Fed meeting.

The ADP weekly employment change reading may pressure USD if it indicates another decline in staffing levels. Meanwhile, the long-delayed JOLTS job openings reports for September and October are finally due. Continued cooling in labour demand would reinforce evidence of slack in the jobs market, potentially dragging the Dollar lower as traders reconsider the Fed’s appetite for deeper rate cuts.

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TAGS: Pound Dollar Forecasts