**2025-10-29 Pound to Dollar Price Forecast: GBP Slides Below 1.32 as Fed Cuts Rates**
*Original reporting by James Elliot, exchangerates.org.uk*
The foreign exchange landscape has experienced notable shifts in recent weeks, with the British Pound Sterling (GBP) sliding under the 1.32 mark against the US Dollar (USD). This movement comes against a backdrop of significant macroeconomic events, most notably the US Federal Reserve’s announcement to cut interest rates, which has rippled across currency markets and sparked a fresh round of forecasting for the GBP/USD pair. In this article, we explore the drivers behind this currency movement, examine forecasts from leading analysts, and provide insights on what may be ahead for the pound-dollar exchange rate.
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### Key Events: Fed Rate Cut and Market Repercussions
After months of speculation, the US Federal Reserve officially reduced its benchmark interest rate by 25 basis points at its October 2025 meeting. This move was widely anticipated by markets but still managed to jolt currency trading activity, as it marked a departure from the Fed’s previously hawkish tone throughout much of 2024 and early 2025.
Key market reactions included:
– An initial weakening of the US Dollar against most major currencies
– A brief equity rally in US markets
– Heightened volatility in emerging market assets
Despite market expectations of further dollar softness, the GBPUSD cross came under pressure, falling below the psychologically significant 1.32 handle. This development points to unique challenges facing the pound, even as the dollar retreats from multi-year highs.
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### Factors Weighing on the British Pound
Several structural and cyclical headwinds have combined to hold back the pound, despite what would otherwise be a supportive environment stemming from a less aggressive Federal Reserve.
#### 1. UK Economic Data Disappoints
Recent macroeconomic releases in the United Kingdom have painted a picture of subdued growth. Key reports included:
– Q3 GDP data revealing tepid growth, failing to meet analyst forecasts
– Monthly industrial and manufacturing production numbers showing contraction or meagre expansion
– Weaknesses in consumer sentiment and retail sales figures pointing to caution among households, fueled by cost-of-living concerns
#### 2. The Bank of England’s Cautious Stance
While the Bank of England (BoE) has maintained its policy rate at restrictive levels to combat persistent inflation, forward guidance has shifted in a more dovish direction. Market participants now expect an initial BoE rate cut in early 2026, with the central bank remaining vigilant on inflation but clearly worried about stalling economic growth.
#### 3. Domestic Political Uncertainty
With a general election looming within the next year, UK political risk has increased. Investors remain wary on several fronts:
– Concerns about potential fiscal loosening by whichever party gains power
– Uncertainties over post-Brexit regulatory divergence and its impact on trade negotiations, particularly with the European Union and the United States
– Renewed debate on Scottish independence and other regional tensions
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### Immediate Market Reactions
The interruption of sterling’s recent upward momentum, especially after the Fed rate cut, has been characterized by:
– An initial spike up to 1.3250, followed by a rapid drop to as low as 1.3180
– Heavy selling pressure from institutional investors, as detected by high volumes in sterling futures and options contracts
– A marked rise in implied volatility, with options pricing in the risk of further sharp moves
Technical analysts note that the move under 1.32 exposes the pair to further downside towards previous support levels at 1.3130 and 1.3080.
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### Analyst Forecasts for GBP/USD into 2026
Currency strategists are re-evaluating their positions and offering updated guidance given the evolving macroeconomic and political backdrops. Forecasts from a selection of leading institutions include:
#### Bank of America
– Revises its year-end
Read more on GBP/USD trading.