The GBP to USD exchange rate remains under pressure as the British Pound (GBP) grapples with a combination of slowing economic growth and increasing concerns regarding fiscal policy. Recent data revealed that the UK economy grew only 0.1% in Q3, falling short of expectations. Analysts now predict that the Bank of England (BoE) may cut interest rates in December, further diminishing the appeal of the pound. As of late October, GBP was trading at $1.3209, marking a decline that places it at its weakest in nearly three months against the US dollar.
Investor sentiment regarding the GBP is particularly negative ahead of the UK's Autumn budget on November 26, where expectations of potential tax hikes and interest rate cuts are pervasive. The Office for Budget Responsibility (OBR) is also expected to revise productivity forecasts downward, projecting a £20 billion budget shortfall that further clouds the economic outlook.
On the other hand, the US dollar (USD) has seen a decline as the market's risk appetite improves. This shift occurred alongside the resolution of the longest government shutdown in US history, which has somewhat lessened demand for the safe-haven currency. However, USD traders are bracing for a slew of economic data releases, which could influence the greenback's trajectory.
Currently, GBP to USD is trading at approximately 1.3160, which is 1.7% lower than its three-month average of 1.3393. The currency pair has exhibited stability within a relatively narrow range from 1.3019 to 1.3646, but upcoming fiscal developments in the UK may catalyze further volatility. Both the UK’s fiscal uncertainty and the divergence in monetary policy between the BoE and the US Federal Reserve will continue to be critical factors influencing the exchange rate in the near term.
