Pound To USD Forecast: Is Now a Good Time to Buy US Dollars with Pounds?

GBPUSD Forecast Highlights

• GBPUSD recovers to its previous trading level near 1.340. following Autumn Budget
• US/UK in rate cutting cycles in the next few months
• Cable likely to trade within the 1.300-1.370 range

How has the Pound performed against the Dollar recently?

Exchange rates are inherently volatile. Since my last update in October, GBPUSD first slumped to 1.300, then it rebounded sharply. Net movements were minimal and, at the time of writing, settled around 1.340.

What were the catalysts behind the volatile prices here? The Autumn Budget is one; Dollar movements another.

In particular, the much-delayed Budget occupied a significant chunk of the political spectrum during October-November. Initially, investors feared the worst. Massive tax hikes that would suck growth out of the economy. Hence, GBP weakened across the board.

However, after much political haggling the eventual Budget was not as bad as predicted. Prices swiftly recovered; 1.300 was affirmed as technical support.

What now? If we step back and look at Cable’s chart, the range at 1.300-1.380 is definitely large enough for GBPUSD to bounce around for a while longer.

The entire Budget process has showed us that investors crave certainty over some one-sided tilt (be it tax cuts or tax hikes). If the next Budget continues like the last one, expect a volatile trend leading to its final publication.

For now, GBP may bounce around 1.320-1.360 until the arrival of the new year.

Is it a good time to buy US Dollars with pounds?

Sterling-USD first depreciated into 1.300 and then rebounded strongly. Given Cable’s recent strength, should we sell GBP to buy USDs before the rate weakens again?

Yes, if you need some US dollars in the near term. The current rate (1.33) may not be a bad rate to get some dollars.

After buying some dollars now, you may want to wait and see if GBP can trend higher. Its current momentum is modestly bullish. A climb above 1.340 does not seem too difficult.

Will the pound strengthen against the USD in the first quarter of 2026?

2025 is a year of two halves for Sterling. The first half was bullish and prices surged from 1.220 to 1.380; the second half, not so. Uncertainty and fear dragged the rate back down to 1.300.

What will 2026 bring?  It depends on: a) UK growth and inflation outlook, and b) US rates cycle.

First, on UK inflation. The Bank of England cut rates three times this year, and pulled the policy Base Rate from 4.75 percent to 4 percent. The next meeting, scheduled on December 18, is expected to produce another reduction. But this is not a certainty. UK CPI readings are still too high. The latest CPIH printout was still stuck at 3.8 percent.

Still, investors are modestly optimistic that UK corporate and household growth, as evidenced from Sterling’s recent bounce, will edge higher in the weeks to come.

Goldman Sachs, the US investment bank, recently predicted that “the UK economy to expand 1.1% next year and inflation to fall to 3.4% in 2025 and to 2.3% in 2026.” In other words, UK is expected to continue its ‘muddle through’ path in the next months.

What about the direction of US rates? Given that a new chair is about to be announced early next year, the base case here is that more rates cuts are on the way. The question is, how far?

The December FOMC meeting, like BoE’s, could see a rate cut. But that’s largely discounted by the market. Market participants are more interested in the Fed’s ‘dot plot’ that spells out the central bank’s economic reasoning. Will the cooling job market be a concern? Are tariffs preventing the bank from easing further? et cetera.

For now, the base case for the Fed is a mildly dovish one (although the president clearly likes a much more accommodative Fed).

An economic black swan next year could be the deteriorating consumer sentiment. Look at the chart below. Despite the sky-high US stock indices, together the associated wealth multiplier effect, US consumer sentiment is tanking (see below).

Recent readings are near the lowest level in 45 years. That’s shockingly bad.

Eventually, this negative consumer sentiment will hit corporate earnings and, potentially, stock prices. This means lower Fed Funds Rate. But equally, a bearish economy environment tends to benefit the US dollar.

Overall, there are many economic forces pulling the GBPUSD in all directions. Some are positive; some negative. The net effect. however, could be a neutral outlook. Until a firm market consensus is formed (ie, dollar weakness), I’d look to the 1.300-1.370 band as a general trading range for the 1Q of 2026.

Source: Yardeni.com (Dec 2025)

What is the GBPUSD forecast in weeks, months, and years?

After a turbulent Budget, many investors are glad that it is over. More importantly, the economic damage was not significantly out of the tolerated range.

You can see this relief rally in GBPUSD. As we stretch further out into the future, the pricing of the FX rate appreciates. 1.350 is currently the anticipated cluster range in the next future.

Is this range overly optimistic? I think not. As discussed above, many economy factors are impacting GBPUSD simultaneously. But the net economic effect may be smaller than expected. The forecast range is not too wide at the moment – signally caution – so the rate should bounce up and down within the 1.300-1.370 range.

Source: fxstreet.com (Dec 2025)