Modified: Tuesday, 4 November 2025 17:45 BST

– Written by


David Woodsmith

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Dips as Reeves Warns of Tax Hikes

The Pound to Dollar exchange rate (GBP/USD) slipped below the 1.3100 level to hit fresh 6-month lows near 1.3070.

GBP was undermined on Tuesday by a clear warning from Chancellor Reeves that taxes will be increased this month.

There was also increased speculation over further Bank of England rate cuts this year with Sterling also undermined by weaker equity markets.

GBP/USD Forecasts: 6-month lows

There is notable uncertainty over the dollar outlook, but GBP/USD is at risk of a slide to 1.3000.

Just after Tuesday’s European open, Chancellor Reeves delivered a very unusual pre-budget speech to set out the framework for the November 26th budget and justify the potential decisions, especially on taxes.

There was an attempt to justify higher taxes and clear evidence that Reeves will look to put pressure on the Bank of England to cut interest rates at a faster pace and create the conditions for lower bond yields.

There was choppy trading in UK bonds with the 10-year yield close to 2025 lows just below 4.40% before trading around 4.42%.

The FTSE 100 index traded around 1.0% lower on the day with weaker risk conditions.

According to Reeves; “As I take my decisions on both tax and spend, I will do what is necessary to protect families from high inflation and interest rates.”

Victoria Scholar, head of investment at Interactive Investor, commented, “In an unusual address ahead of this month’s Autumn Budget, Chancellor Rachel Reeves tried to prepare voters for tax hikes by laying out the UK’s economic challenges.”

There will be speculation of targeted measures to cut the cost of living which could include lower taxes on retail energy prices.

There is also a clear intent to get borrowing costs down with lower bond yields and further Bank of England rate cuts.

Markets are pricing in around a 35% chance of a cut this week and the Pound will be vulnerable if expectations of a cut this year continue to build.

The dollar has maintained a firm tone in global markets amid fresh uncertainty over Fed policy. The US government shutdown could also have a greater impact

MUFG commented; “There is no end in sight to the shutdown and the longer this drags on the bigger the economic implication will be.”

Markets are now pricing in around a 70% chance of a further rate cut at the December meeting, but here is a high degree of uncertainty.

MUFG added; “Powell likely wants to avoid appearing as though markets are forcing the Fed to cut. We still argue that the labour market warrants more rate cuts, but the risk is the Fed skips meetings ahead.”

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