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What way for the pound after dire GDP and forecast rate cut?

Journalist: Laura Miller, Freelance

ended 12. December 2025

Data just out from the ONS showed a 0.1% contraction in UK GDP in October, and expectations of a December interest rate cut by 0.25% practically nailed on – with some suggesting even a 0.5% cut is likely.

  •  What does this all mean for the pound?
  • Also if the GDP data from the month before the Chancellor’s tax-raising Budget was this bad, how much worse will the November and December numbers look – and what could this mean for the pound's prospects for the end of the year/ start of next year?
  • How will holiday makers buying foreign currency for a winter getaway be affected? 

4 responses from the Newspage community

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Editor
Tony RedondoVerified
Founder at Cosmos Currency Exchange
Like the UK economy, the Pound is on its way down. Next week’s BoE rate cut is almost a cast-iron guarantee, and the forward guidance is likely to be dovish. The Pound/Euro exchange rate is likely to head towards 1.11 interbank as the ECB is very likely to stay put on rates next week. The Pound/Dollar exchange rate is also likely to fall but at a gentler pace, as the Fed will also cut in 202,6 but at a slower pace than the BoE. Next week’s employment data is likely to be bad, and sadly, the UK is very likely to welcome in 2026 by going into a technical recession. It's not all bad news for British travellers. The Pound is likely to hold up against the Australian, New Zealand, and Canadian Dollars, but trips to Europe, Switzerland, or Japan are likely to get much more expensive.
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Kundan BhaduriVerified
Entrepreneur, Investor and Landlord at The Kushman Group
Britain's economic trajectory has become a laughing stock in creating this managed decline, and the latest ONS figures confirm what entrepreneurs like myself have known for months.

We are sliding downhill with remarkable consistency. October's 0.1% contraction follows a pattern of anaemic growth that makes one wonder whether the Chancellor believes economics functions like Marxist theory rather than actual human incentive. The prospect of a Bank of England rate cut in December, now practically certain, will further weaken sterling at precisely the moment when imported materials for construction already cost a fortune and when savers who have played by the rules face yet another punishment for their prudence.

One cannot help but observe the grim irony that we are cutting rates to stimulate an economy that lacks the supply side capacity to respond. At this rate of 'yes men' that the Chancellor and the PM have surrounded themselves with, who is going to bell the crazy cat in No 11?
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Prem RajaVerified
Head of Trading Floor at Currencies 4 You
Sterling did see a brief lift after the Budget, largely driven by relief rather than any improvement in the underlying outlook, but that support has since faded and the pound is now back on the back foot. The latest GDP contraction underlines how fragile UK growth remains.

A 25-basis-point rate cut from the Bank of England next week is now widely expected. While rate cuts can be positive for the domestic economy, they tend to reduce the pound’s yield appeal in the short term, particularly if easing is not matched elsewhere.

Looking ahead, slow growth and the lagged impact of tighter fiscal policy suggest the outlook for the pound remains challenging into year-end and early next year. For holidaymakers, a softer pound could mean higher costs abroad, making it sensible to plan currency purchases rather than leaving them to the last minute.
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David BelleVerified
Founder and Trader at Fink Money
Sterling's under a little bit of pressure as today's GDP number almost certainly implies a cut at the next meeting.

But in my view, lots of this is priced in.

The poor growth environment was likely priced in before Labour even came into government, because it's the Labour Party.

A weaker pound is likely to be a net negative since we already have expensive energy and buying more abroad is just going to be relatively more expensive, unless some excellent hedging has been undertaken.

I am not lost for words anymore, because the writing has been on the wall for growth for a long time now.