Pound Faces Severe Headwinds Ahead of November Budged. Forecast as of 25.09.2025 | LiteFinance
If currency rates on Forex were determined solely by monetary policy, the pound would be an undisputed leader. However, concerns about the UK’s November budget are dragging the GBPUSD pair down. Let’s discuss these topics and make a trading plan.
The article covers the following subjects:
Major Takeaways
- London needs to find £35 billion.
- Demand for British bonds is waning.
- The Bank of England is ready to pause for a long time.
- For the GBPUSD pair, trading within the 1.33–1.36 range is relevant.
Weekly Fundamental Forecast for Pound Sterling
According to the rules established by the Treasury, Chancellor Rachel Reeves should find approximately £35 billion to fill the budget gap. The issue is that the possibilities for reducing expenses are quite limited. The only option is to raise taxes, which the Labour Party promised not to do. Violations are inevitable in any case, and the fear of consequences triggers periodic collapses in the GBPUSD pair.
As a rule, markets rise or fall on expectations. Despite the fact that Rachel Reeves will not present an amended draft budget until November, fears about the Chancellor’s helplessness are keeping the pound on edge. According to Deutsche Bank, fiscal problems outweigh the hawkish rhetoric of MPC members and the Bank of England’s willingness to keep the repo rate high for a long time. The easing of the Fed’s monetary policy will make it the highest among the G10 countries.
Central Banks’ Interest Rates
Source: Bloomberg.
According to the OECD, the UK economy will be the fastest-growing in the G7 in 2025, with the exception of the US. In terms of inflation, the UK will definitely be ranked first. The Paris-based organization has raised its consumer price forecast by 0.4 percentage points to 3.5% in 2025 and by the same amount to 2.7% in 2026. Huw Pill agrees with this assessment. According to the Bank of England’s chief economist, the changes in inflation are structural in nature, first and foremost, due to a tight labor market and adverse labor supply. The remaining employees can afford to demand higher wages, which accelerates the country’s CPI.
If currency movements on Forex were determined solely by monetary policy, the pound would be unrivalled. However, exchange rate pricing is impossible without capital flows. In this regard, GBPUSD bulls are losing to their opponents. The closer the date of the draft budget presentation, the lower the appetite for UK securities. The latest auctions for 30-year and 5-year bonds saw the lowest demand in many years.
UK Gilts Demand-to-Volume Ratio
Source: Bloomberg.
The decline in US stock indices is fueling the sell-off in the GBPUSD pair. The pound is sensitive to changes in global risk appetite, and the S&P 500’s second consecutive closing in the red is causing concern.
Weekly GBPUSD and EURGBP Trading Plan
Thus, divergence in monetary policy is counteracting capital flows. As November approaches, pressure on the pound will increase. Against this backdrop, the GBPUSD pair may be stuck in the consolidation range of 1.33–1.36. A fall towards its lower boundary should be used for purchases, and a rebound from the upper boundary could be seen as a selling opportunity. At the same time, long positions on the EURGBP pair can be opened with targets at 0.881 and 0.895.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of GBPUSD in real time mode
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