Modified: Monday, 1 December 2025 22:31 BST

– Written by


Frank Davies

STORY LINK GBP to USD Forecast: Pound Sterling Subdued as Budget Fallout Deepens

The Pound to US Dollar exchange rate (GBP/USD) drifted sideways on Monday, with UK political tensions and shifting expectations around US monetary policy leaving the pairing without a clear direction.

At the time of writing, GBP/USD was hovering around $1.3232, stuck in a tight band since the session began.

The Pound (GBP) traded without conviction at the start of the week, as the political and economic aftershocks of the UK’s autumn budget continued to weigh on sentiment.

Sterling was unsettled by fresh accusations that Chancellor Rachel Reeves misrepresented the true state of the public finances ahead of the budget. The Office for Budget Responsibility (OBR) had revised productivity lower, but this was offset by stronger wage growth and healthier tax revenues — leaving Reeves with a surplus rather than the anticipated funding gap. Despite this, she signalled in pre-budget comments that tax increases were unavoidable.

The controversy has emerged at a difficult moment for the government. Both Reeves and Prime Minister Keir Starmer are grappling with persistently weak polling numbers and simmering frustration within Labour ranks, fuelling concerns that political tensions could escalate.

This undercurrent of instability kept the Pound on the back foot throughout Monday’s session, with traders wary that further volatility may lie ahead.

The US Dollar (USD) found its momentum constrained at the start of the week, even as markets leaned towards a risk-off stance, amid rising expectations of an imminent Federal Reserve interest rate cut.

Confidence in a December cut has grown steadily, with markets now pricing in an 87.6% probability — up from 84.4% a week ago. Softer labour market indicators have fuelled speculation that the Fed may act sooner rather than later to ease borrowing costs.

With rate-cut expectations building, the ‘Greenback’ struggled to extend any gains, its upside capped by the growing conviction that lower interest rates may be just around the corner.

GBP/USD Forecast: UK Politics Could Keep Pressure on Pound

Looking ahead, the political and fiscal turbulence following the autumn budget is likely to remain a dominant driver for the Pound, particularly in the absence of major UK data releases.

If pressure on Reeves and Starmer continues to mount — especially if dissent within the Labour Party becomes more vocal — Sterling may find it difficult to attract sustained support. Renewed political instability remains a well-established risk factor for GBP.

For the US Dollar, broader market sentiment may determine the next move. A risk-on shift would typically limit demand for the safe-haven currency, while a turn toward risk-off trading could help the ‘Greenback’ regain ground.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts