The outlook for the British pound remains uncertain! With the central bank decision imminent, how will the exchange rate fluctuate?

The GBP/USD has rebounded after breaking through a key support level, but investor sentiment remains cautious. As the Bank of England’s interest rate decision approaches, market opinions on the pound’s future diverge. According to LSEG data, the currency market currently estimates a near 35% chance of a rate cut this week, with the probability rising to nearly 70% in December. This discrepancy reflects investors’ uncertainty about the central bank’s policy path.

Divergence in Central Bank Decisions, Dovish Signals Strengthen

Most economists expect the Bank of England to hold interest rates steady at 4% for the second consecutive time. However, major financial institutions such as Barclays, Goldman Sachs, and Nomura Securities have issued different judgments. These institutions point out that, influenced by recent economic data, the central bank might break expectations and cut rates to 3.75%. The latest comments from Chancellor of the Exchequer Jeremy Hunt further reinforce market expectations of a possible rate cut.

This divergence in expectations is triggering a chain reaction in the market. Catril, an analyst at National Australia Bank, stated that even if the Bank of England remains on hold this month, its policy stance could still lean dovish, implying limited upside for the pound. In this environment, the outlook for the GBP is not optimistic.

GBP Faces Multiple Pressures

Since November 4, the GBP/USD has fallen to around 1.3010, hitting a nearly 7-month low. Meanwhile, EUR/GBP has reached a new high in over two years, vividly reflecting the relative weakness of the pound in the forex market.

TD Securities believes that regardless of whether the central bank takes action this time, the GBP will find it difficult to escape a downward trend. The firm notes that EUR/GBP still has room to appreciate further, while GBP/USD continues to face depreciation risks. If the GBP/USD breaks below the 1.30 support level, it could test the April low of around 1.2712.

Budget May Worsen GBP Depreciation Expectations

The UK budget on November 26 has become a key variable. Analysts at Mitsubishi UFJ expect the budget to include tax hikes to meet fiscal rules, which could provide the Bank of England with policy space for future rate cuts. Once the BoE begins a rate-cutting cycle in December, the pound may face further downward pressure.

The institution forecasts that EUR/GBP could rise to 0.8900 in the first quarter of 2026, and further to 0.9000 in the second quarter. This serves as a clear warning signal for GBP investors. Under the influence of multiple factors, the outlook for the pound appears relatively pessimistic.

The market is now in a wait-and-see mode. The outcome of the Bank of England’s interest rate decision will directly determine the short-term direction of the GBP exchange rate. Investors should closely monitor subsequent developments.