**British Pound to Dollar Forecast: GBP Pauses at 1.32 as Budget and Fed Risks Loom**
*By Adam Solomon (credit to currencynews.co.uk)*
**Overview**
The British pound’s recent rally against the US dollar has paused below the pivotal 1.32 level, as investors brace for the looming twin risks of the UK Autumn Budget and potential shifts in US Federal Reserve policy. Although sterling has enjoyed support in recent sessions, market sentiment remains highly sensitive to upcoming macroeconomic events, which could redefine the near-term trajectory for GBP/USD.
This article examines the recent performance of the GBP/USD pair, underlying drivers behind sterling’s strength, the risks presented by fiscal and monetary policy events, and outlines scenarios for the exchange rate going forward. All analysis is based on developments reported by Adam Solomon and the team at Currency News, which continues to be a trusted resource for forex commentary and projections.
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**GBP/USD Recent Performance**
– GBP/USD advanced for five consecutive sessions before stalling near 1.32.
– The pound benefited from a broad-based retreat in the US dollar, which has unwound sharply as US Treasury yields eased.
– Markets partially unwound previous long US dollar positions as expectations for further Fed rate hikes have diminished.
**Sterling’s Underlying Strength**
1. **Global Risk Sentiment Improves**
– Improved risk appetite in global markets has encouraged a move away from the safe-haven dollar.
– Global equities have rebounded, supporting risk-sensitive currencies like the pound.
2. **Hawkish BoE Commentary**
– Despite weaker UK economic data, some Bank of England (BoE) policymakers guided that monetary policy will remain tight for an extended period to contain inflation.
– Recent comments have dampened expectations for imminent BoE rate cuts, helping the pound stabilize and even gain against the dollar.
3. **Dollar Weakness Rather Than Sterling Strength**
– Analysts highlight that GBP’s move is more about the dollar’s slide than outright sterling outperformance.
– Other major currencies have similarly advanced against the dollar in recent sessions.
**Key Risks on the Horizon**
**1. UK Autumn Budget (Chancellor Jeremy Hunt)**
– Scheduled for later this week, the Autumn Budget will provide new fiscal projections, tax and spending plans.
– Investors will watch for clarity on:
– Government borrowing plans
– Taxation adjustments
– Support for households and businesses
– Impact on gilt (UK government bond) yields
– Market participants are wary that aggressive fiscal expansion could:
– Trigger fresh volatility in UK bonds (gilts)
– Undercut the pound if confidence in UK public finances falters
**2. Forthcoming US Federal Reserve Policy Minutes**
– The recent softening of US consumer inflation data has led investors to speculate that the Fed may not need to hike rates further.
– This week’s Fed meeting minutes are a focal point:
– Any signals of a hawkish stance or concern about persistent inflation could revive dollar demand and pressure GBP/USD.
– Conversely, reaffirmation of a wait-and-see approach might keep the dollar subdued.
**Economic Background**
– UK national statistics have begun to show visible cracks in the economy, with stagnant growth and still-high price pressures.
– Q3 GDP growth was flat, raising the specter of technical recession.
– Labour market data has softened, with an increase in unemployment and slowing wage growth.
– Despite challenges, inflation remains above the BoE’s 2 percent target, inhibiting policymakers from easing rates quickly.
**Market Positioning and Technical Outlook**
– The GBP/USD correction higher has left positioning less one-sided after earlier bearish sentiment.
– Key levels to watch:
– Resistance: 1.32 (recent high), followed by 1.3250 and 1.33
– Support: 1.3140 (intraday lows), then 1.3080 and 1.
Read more on GBP/USD trading.