– Written by


David Woodsmith

STORY LINK Pound to Dollar Price Forecast: GBP/USD Drops on UK Budget Risks

The Pound-to-Dollar exchange rate (GBP/USD) slipped sharply on Tuesday as investors turned cautious ahead of the UK government’s upcoming autumn budget.

At the time of writing, GBP/USD was trading at 1.32815, down around 0.44% from Tuesday’s opening levels.

The Pound (GBP) came under renewed pressure after the Office for Budget Responsibility (OBR) warned that the UK faces a £20bn fiscal shortfall, largely due to weak productivity and slowing growth.

The findings intensified speculation that Chancellor Rachel Reeves may be forced to introduce tax increases in next month’s budget to shore up the nation’s finances.

The prospect of tighter fiscal measures dampened market sentiment, with investors wary that higher taxes could weigh on household spending and slow the UK’s already fragile recovery.

As a result, Sterling struggled to find support through the European session, with the Pound weakening against a firming US Dollar.

The Greenback (USD) held steady ahead of the Federal Reserve’s interest rate decision on Wednesday, buoyed by safe-haven demand as global markets adopted a more cautious tone.

Investors widely expect the Fed to announce a 25-basis-point rate cut, but uncertainty over future policy guidance kept USD trading volatile.

GBP/USD Forecast: Fed Decision to Steer Mid-Week Direction

Looking ahead, attention will turn squarely to the Federal Reserve’s rate announcement, which is likely to set the tone for mid-week market movement.

If Chair Jerome Powell signals that further rate cuts are on the table before year-end, the Dollar may weaken, potentially giving GBP/USD scope to rebound.

However, a more measured tone — or hints that this could mark the final cut of the cycle — could strengthen the Greenback, pushing the pair lower still.

With the UK data calendar empty until the end of the week, the Pound will remain heavily influenced by global sentiment and speculation over both Fed policy and UK fiscal plans in the run-up to the November budget.

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Fed Interest Rate Decision and Powell’s Press Conference

While economists speculate about the timing of a BoJ rate hike, the Fed will take center stage later on Wednesday, October 29.

Economists expect the Fed to cut interest rates by 25 basis points. Unless there is a surprise 50-basis-point cut, Fed Chair Powell will set the tone for markets. Support for a December rate cut to bolster the labor market and acknowledgement that inflation has peaked could send USD/JPY toward 150 and the 50-day EMA. If breached, the 200-day EMA would be the next key technical support level.

The US government shutdown could extend to day 29, leaving the Fed flying blind on crucial labor market data. Fed Chair Powell had already taken a more dovish stance before the shutdown as labor market data signaled weaker conditions.

Beyond Fed Chair Powell’s views on interest rates, there is also the potential winding down of Quantitative Tightening (QT).

On October 14, 2025, Fed Chair Powell gave his strongest signal on QT, stating:

“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions.”

He also noted that there were early signs of tightening liquidity conditions.

Notably, winding down QT would also narrow the US-Japan rate differential, favoring the yen, potentially being compounded by a hawkish BoJ policy stance. This scenario could trigger a market event similar to the yen carry trade unwind on July 31, 2024.

The Australian dollar to US dollar (AUD/USD) exchange rate is trading near 0.6578, up 0.3% on the day as the currency rebounds from recent lows.

Nomura has turned more optimistic on the Aussie, targeting a move to 0.6875 by the end of December as the dollar’s strength fades and domestic inflation data improve.

“We think AUD looks cheap relative to a range of cross-market indicators,” the bank said, adding that the recent pull-back “creates an opportunity to express a more bullish view on the currency.”

The easing of US–China trade tensions is a key factor. “Calmer trade relations leave a window of opportunity for volatility to remain low or drift lower, providing a healthier backdrop for AUD to rebound,” Nomura wrote.

Commodity prices are another support. “Elevated copper prices should help through the terms-of-trade channel,” it said, though the bank acknowledged that gold’s recent pull-back could pose a short-term risk.

Nomura also expects Australia’s Q3 CPI to surprise on the upside, with stronger non-tradables and services inflation reducing the likelihood of near-term RBA rate cuts.

“Our forecast CPI would mark a material miss versus the RBA’s earlier expectations,” the bank noted, “which could make the rates channel more supportive for AUD.”

Nomura’s bullish view is further reinforced by seasonal year-end inflows and a potentially softer US dollar, with the Fed likely to adopt a more dovish stance following weaker inflation data.

Current AUD/USD rate: 0.6578.

Nomura forecast: 0.6875 by December 2025.

The Pound to US Dollar (GBP/USD) exchange rate slipped on Tuesday as renewed UK fiscal concerns weighed on Sterling ahead of the government’s autumn budget.

DAILY RECAP:

The Pound (GBP) came under pressure on Tuesday after the Office for Budget Responsibility (OBR) warned that the UK faces a £20bn fiscal gap due to weak productivity growth.

The assessment fuelled speculation that Chancellor Rachel Reeves may be forced to announce tax hikes in next month’s Autumn Budget to stabilise public finances.

The prospect of tighter fiscal policy dampened market confidence, keeping Sterling subdued throughout Tuesday’s European session.

Meanwhile, the US Dollar (USD) traded mixed as investors positioned cautiously ahead of Wednesday’s Federal Reserve interest rate decision.

The Greenback firmed modestly against risk-sensitive rivals amid a mildly risk-off backdrop, though gains were capped as traders awaited confirmation of the Fed’s expected 25bp rate cut.

As a result, GBP/USD drifted lower through the session, with broader sentiment providing little relief for either currency.

Near-Term GBP/USD Forecast: Fed Decision to Steer Dollar Moves

Looking ahead, the Federal Reserve’s policy announcement will dominate mid-week trade.

Markets have already priced in a quarter-point rate cut, which could see the Dollar weaken modestly if confirmed.

However, a larger cut — or a dovish signal on future easing — could spark a sharper Greenback selloff, potentially allowing the Pound to recover lost ground.

For Sterling, a quiet UK calendar leaves the currency vulnerable to external sentiment shifts.

Should risk appetite improve and markets turn optimistic, GBP/USD could rebound as investors rotate out of the Dollar and back into higher-yielding assets.

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The Euro to Pound (EUR/GBP) exchange rate climbed to 0.8785 (+0.58%), its highest level since 2023, as the pound weakened ahead of the UK’s November 26 Budget.

Foreign exchange analysts at Rabobank note that the Pound Sterling has come under renewed pressure against the single currency, with EUR/GBP breaking above its July high, driven by softer UK data and growing fiscal concerns.

The latest BRC shop price index showed a modest 1.0% year-on-year rise, a weaker reading that “could be taken as an encouraging sign by BoE policy doves, which would be a negative factor for the pound.”

At the same time, a Financial Times report suggesting the OBR will sharply downgrade its UK productivity forecast added to the gloom.

Based on estimates from the IFS think tank, Rabobank calculates that “each 0.1ppt downgrade in productivity will increase the size of the UK’s fiscal black hole by GBP 7bn.”

The anticipated 0.3ppt downgrade, therefore, implies “even more tax hikes, spending cuts or gilt supply than many market participants had been preparing for.”

The bank argues that these developments reinforce its view for a slow grind higher in EUR/GBP into 2026.

“We continue to expect a slow creep higher in EUR/GBP to 0.89 by the middle of next year,” it said, while cautioning that the move is unlikely to be swift given already crowded euro-long positioning.

Rabobank expects two more Bank of England rate cuts next year, in February and April, compared with its forecast that the ECB has already completed its easing cycle.

The pound’s near-term fate, it added, will hinge on the credibility of Chancellor Reeves’s Budget and whether concerns over productivity and fiscal discipline ease in the weeks ahead.

Created on October 28, 2025

• The British pound struggled to hold gains against the US dollar on Monday, with key technical barriers near $1.34 and support at $1.32.
• Despite mixed sentiment, dollar strength persists ahead of the Fed’s interest rate decision.

The British pound was very noisy during trading on Monday as the market tried to rally, but it just didn’t seem able to hang on to gains. It’s worth noting that the 200-day EMA is in the same neighborhood, which will naturally attract attention as it has offered support a couple of different times. That being said, this is a situation where you have to view the market through the prism of trying to figure out where we are going next. The 200-day EMA offering support and the 50-day EMA offering resistance isn’t unusual, but it’s also notable that the 1.34 level is in the same area, providing an additional barrier.

This week features the Federal Reserve and its interest rate decision, and traders should be mindful of that. Ultimately, despite headline negativity surrounding the US dollar, it has strengthened against the British pound and many other currencies since the FOMC press conference. In other words, the market wasn’t behaving as many expected.

Massive Support Below

The 1.32 level below should act as significant support, and if we were to break down below that point, the British pound could start to fall apart, potentially reaching toward the 1.27 level. Rallies at this point should continue to pay attention to the 50-day EMA, the 1.35 level, and the previous uptrend line. Breaking above that would be very bullish, but for now, it’s important to note that the US dollar continues to show resilience despite all the challenges thrown at it; a trend is visible across multiple currency pairs.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Created on October 28, 2025

• The euro surged against the yen on Monday, hitting fresh highs as yen weakness spread across markets.
• With risk appetite firm and central bank decisions ahead, traders continue to favor buying dips in this strong uptrend.

The euro rose against the Japanese yen during trading on Monday, or perhaps better put, the Japanese yen has fallen against almost everything on Monday. That being said, we are at a fresh new high, and it does look like the overall momentum still favors buying dips in this pair, as the euro clearly is the obvious winner at this juncture.

The 175.50 yen level underneath should continue to be massive support. And it looks to me like the euro may be trying to get to the 180 yen level before it’s all said and done. You should also keep in mind that there is a Bank of Japan as well as a European Central Bank decision for interest rates this week, and that will cause a lot of volatility. Nonetheless, as long as we have more of a “risk on” type of attitude around the world, it does make sense that we continue to see this one open up to the upside, given enough time.

I Can’t Short

And at this point in time, it’s almost impossible to get short. If we were to break down below the 172 yen level, then maybe we start to fall apart, but it’s going to take a lot to even get to that area. I expect to see a lot of noise. I expect to see a lot of questions asked about everything.

I also expect to see a lot of carry traders continuing to take advantage of the Japanese yen getting eviscerated. The situation between the Americans and the Chinese seems to be cooling off a bit. And if that does in fact end up being the case, then I think you have to look at this as a market that continues to rise as the Japanese yen is considered to be a safety currency.

That is being run from as people are looking for a higher rate of return in almost all assets. All things being equal, this is still an uptrend, and I think that continues to be the case going forward. With that, I think you have to look at this as a market that is long only at the moment.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Created on October 28, 2025

• Another day, another choppy session for the euro against the US dollar.
• You can see that we did initially rally a bit during the Monday session to reach the 50-day EMA, but turned around to show signs of hesitation.
• The 50-day EMA is a psychologically important technical signal that a lot of people will be watching, and it is worth noting that market participants will be looking at this through the prism of a potential sideways market.

I don’t really think you have a whole lot of momentum here one way or the other, but I would point out that perhaps we could see short-term rallies get faded near the 1.17 level. I also recognize that markets have been doing more of a pro-dollar move since the FOMC meeting than anything else, which is a bit of a surprise because I was told by everybody in the online community that the US dollar was going to fall apart.

And you can see we’ve done pretty much nothing but strengthen since then.

Now the question is, will we bounce from here? Maybe. But keep in mind that the FOMC meeting this week, which will feature possibly a rate cut, but the real question is going to be, what do we do here as far as the press conference is concerned? Because that’s probably the real story. And the press conference, of course, will be late on Wednesday, and traders will be looking for hints to ask them where we go from here.

Jerome Will Drive the Next Move

If they don’t sound dovish enough, you will see the euro get absolutely hammered. It is worth noting that the central banks around the world have quite a bit of volatility in store for the market. We have, of course, the Bank of Canada, the Federal Reserve, the Bank of Japan, and the European Central Bank all presenting their latest interest rate decisions this week. So, I expect a lot of volatility anyways.

The fact that Monday didn’t really have a lot in the way of news probably means it makes a lot of sense that we’re just drifting. By the end of the week, we should have some answers as to where we are going, especially as the Fed and the ECB will both be out of the way. But as things stand right now, it is worth noting that the dollar has held up remarkably well.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.