**Pound to Dollar Forecast: GBP/USD Recovery Halts on Dovish BoE Outlook**
*Based on the article by Tim Clayton, Currency News (original article link: [currencynews.co.uk](https://www.currencynews.co.uk/forecast/20251112-44529_pound-to-dollar-forecast-gbp-usd-recovery-halts-on-dovish-boe-outlook.html))*
The Pound to Dollar (GBP/USD) exchange rate recovery paused at the start of this week as markets reflected on fresh signals from the Bank of England (BoE). The BoE adopted a more dovish rate outlook, which stifled Sterling’s recent gains against the US Dollar. The GBP/USD rally from last week lost steam as traders reassessed their bets following the Monetary Policy Committee’s (MPC) latest meeting and subsequent Bank commentary. The evolving expectations surrounding UK interest rates, coupled with shifts in global risk sentiment and economic data releases, are crucial drivers for GBP/USD.
In this detailed analysis, we cover the core developments influencing GBP/USD movements, the current outlook from major financial institutions, and the essential factors to watch for the remainder of the year.
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## Recent Developments and BoE’s Dovish Shift
The BoE’s November policy statement, while leaving rates unchanged at 5.25 percent, indicated increased concerns around the weakening UK economy. The MPC voted 6-3 in favour of holding rates, with three members voting for an immediate rise, highlighting the ongoing policy divide within the bank. Most important, however, was the BoE’s guidance signaling rates may be at or near their peak.
Governor Andrew Bailey’s subsequent comments reinforced dovish expectations:
– Bailey acknowledged “visible signs” of falling inflation.
– He highlighted downside risks to growth, suggesting the BoE may not need to maintain rates at current levels for as long as previously believed.
– Money markets responded by increasing bets that the BoE will begin rate cuts in mid-2024, with about 50 basis points of cuts priced in by late 2024.
This clear shift toward a more dovish stance contrasts with the hawkish guidance still emanating from the US Federal Reserve, contributing to a softer Pound against the Dollar in the short term.
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## The UK Economic Picture: A Worry for Sterling
UK economic indicators continue to paint a nervous picture:
– Latest GDP data showed the economy narrowly avoided contraction in the third quarter, stagnating at zero percent growth.
– Consumer confidence remains subdued, with persistent cost-of-living pressures and subdued retail activity.
– Inflation has come off its multi-decade highs, but core price pressures remain.
The BoE anticipates that inflation will fall significantly in the coming months, potentially undershooting its 2 percent target by late 2024. Wage growth is also expected to moderate.
Key upcoming economic data points for the UK include:
– October CPI figures
– Labour market reports, including wage and employment changes
– Retail sales and PMI business surveys
Disappointment in any of these releases could reinforce the dovish case and weigh further on the Pound.
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## US Dollar Strength Remains a Headwind
While Sterling’s momentum has faded, the US Dollar has regained its footing. The Dollar Index (DXY) rose back above 106.0 this week, reflecting renewed appetite for the greenback as a global safe-haven and the contrasting outlooks for US and other major central banks.
Key tailwinds for the Dollar include:
– The Federal Reserve’s continued insistence on higher-for-longer rates
– Signs of resilience in the US job market and consumer spending
– Heightened geopolitical risks, which drive demand for the Dollar
Fed policymakers have resisted calls to signal an end to their tightening cycle, warning that inflation, especially in services, remains sticky and could require further policy restraint.
Investors are thus far unconvinced that the US will cut rates before next summer, keeping US bond yields relatively high and the
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