GBP/USD exchange rate recovers from more than 6-month low in November
The pound slipped 0.6% against the dollar on 4 November, to around 1.301 – its lowest point since mid-April – after Chancellor Rachel Reeves said she would make the “choices necessary to deliver strong foundations” for the UK’s economy in the autumn budget. Meanwhile, the dollar rose sharply as risk aversion swept through global markets.
The pound retraced its losses over the following two days after the UK’s services PMI for October was revised higher, and the Bank of England (BoE) decided to leave interest rates on hold. However, a narrow 5–4 split amongst the central bank’s Monetary Policy Committee fuelled speculation that rates could still be cut in December.
The dollar tumbled on 7 November following the release of the University of Michigan’s consumer sentiment survey – helping the pound to edge up to 1.316. The print showed a steeper-than-forecast drop in confidence in November, as the ongoing US government shutdown continued to dampen morale.
The pound slipped a fraction against the dollar on 11 November following an underwhelming UK jobs report. Figures showed unemployment rose to its highest level since May 2021, while wage growth slowed, strengthening expectations that the BoE will cut rates in December.
The pound stumbled to a fraction above the 1.30 benchmark on 12 November as rumours surfaced that Prime Minister Keir Starmer could face a leadership challenge following the autumn budget. The dollar edged higher amid hopes of a resolution to the longest US government shutdown in history.
The pound regained its footing the next day, rising to around 1.321, as improving market sentiment reduced the appeal of the safe-haven dollar. The positive mood was prompted by the signing of a funding bill by President Donald Trump that officially ended the US government shutdown. This major development enabled the pound to sidestep weaker-than-expected UK growth data. GDP for the third quarter showed growth printed at just 0.1%, reinforcing BoE rate cut expectations and increasing pressure on Rachel Reeves ahead of the budget.
Having traversed the 1.31 range against the dollar, the pound slumped into the 1.30 mid-range on 19 November after slowing UK inflation boosted BoE rate cut bets.
The dollar struggled the following day after US payrolls provided a mixed picture. Employment growth in September reached its highest level in five months, although the unemployment rate also experienced a slight uptick, and July’s payroll figures were significantly revised down. This prompted some market participants to adopt a more dovish outlook on Federal Reserve policy, though the consensus remains that a rate cut in December remains unlikely.
The pound dollar rate traded in a narrow range before briefly jumping above 1.32 on 25 November. The UK currency was boosted by indications that Rachel Reeves would avoid targeting banks for extra taxation in the forthcoming budget. Meanwhile, its US counterpart retreated after weak jobs and retail sales data reinforced speculation that the Federal Reserve could trim rates in December.
The pound edged up versus the dollar the following day as Rachel Reeves delivered the UK’s long-awaited autumn budget. The announcement included a series of tax increases expected to generate £26.1bn by 2029-30, helping to reduce fiscal uncertainty after an extended period of speculation. Along with stronger growth forecasts from the Office for Budget Responsibility (OBR) for 2025, this prompted a modest relief rally.
The pound dollar rate briefly touched a one-month high in the 1.32 mid-range on 27 November before snapping a five-day rally. The dollar was pressured by the Thanksgiving bank holiday and fresh expectations that the Federal Reserve may vote for a rate cut in December. However, the pair failed to cling onto its gains as analysts questioned whether the fiscal tightening announced in the budget will be implemented.
The pound dollar rate ended the month around 1.323.
GBPUSD: 3-Month Chart
Looking ahead
The BoE opened the door to an interest rate cut on 18 December after signalling that inflation had peaked following its decision to leave borrowing costs unchanged in November.
Influential data from the UK economy in December: Claimant Count Change (16 December), ILO Unemployment Rate (16 December), ILO Unemployment Rate (17 December), S&P Global Composite PMI (18 December), Retail Sales (19 December), GDP (22 December).
The on-again, off-again chances of an interest rate cut from the Federal Reserve on 10 December appear back on after key officials signalled their support.
Influential data from the US economy in December: ISM Manufacturing PMI (1 December), ADP Employment Change (3 December), ISM Services PMI (December 3), Nonfarm Payrolls (5 December), Average Hourly Earnings (5 December), Michigan Consumer Sentiment Index (5 December), Consumer Price Index (10 December), Producer Price Index ex Food & Energy (11 December), Retail Sales (17 December), GDP (19 December), S&P Global Manufacturing PMI (19 December), S&P Global Services PMI (19 December), Core Personal Consumption Expenditures (19 December).