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Out now: October-December Quarterly Forecast.
Uncertainty has been the defining feature of 2026.
Energy disruption, stubborn inflation, volatile bond markets and questions over the sustainability of the AI boom have left businesses navigating an increasingly complicated economic environment. Throw in a major UK Budget, central bank decisions and the US midterm elections and the final three months of the year could prove particularly important for currency markets.
Our latest Quarterly Forecast examines the forces that could shape sterling, the euro and the US dollar as businesses prepare for the end of the year and look towards 2027.
Currency markets have been surprisingly calm… so far
One of the more unusual features of 2026 has been the relative stability of the major currency pairs.
While equities, commodities, bonds and credit markets have experienced considerable swings, sterling has traded within a range of just over six cents against the US dollar and around four cents against the euro since the beginning of the year. That does not necessarily mean businesses should expect conditions to remain calm.
Some of the pressures building elsewhere in financial markets could spill over into currencies. Higher government borrowing costs, energy prices and changing expectations for interest rates all have the potential to alter the relative attractiveness of sterling, the euro and the dollar.
For businesses with international costs or revenues, even apparently modest exchange rate movements can have a meaningful impact on budgets and margins.
How far could GBP/USD and GBP/EUR move?
Our latest report collates forecasts from major financial institutions to illustrate the range of possible outcomes rather than attempting to predict a single exchange rate.
For the end of Q4 2026, the forecasts examined put GBP/USD between 1.28 and 1.36. On a £1 million currency requirement, that range represents a difference of approximately $80,000.
For GBP/EUR, forecasts range from 1.14 to 1.18, creating a potential difference of around €40,000 on £1 million.
That dispersion is an important reminder of the challenge facing finance teams. The objective of currency risk management is not to correctly guess where exchange rates will be in three or six months. It is to understand what different outcomes could mean for cashflow, margins and budgets – and make informed decisions accordingly.
The Autumn Budget
Domestic policy will be one of the biggest themes for the pound this quarter.
The Autumn Budget on 28 October arrives against a difficult backdrop of elevated government borrowing costs and limited fiscal headroom. Markets will be watching closely to see how the government balances spending commitments with the need to maintain confidence in the public finances.
A global sell-off in government debt during September pushed borrowing costs higher, with some of the largest concerns centred on heavily indebted developed economies including the UK and US. Higher yields can have consequences far beyond government finances, potentially influencing business borrowing costs, investment and currency sentiment.
Could the Bank of England increase interest rates?
Inflation will be another crucial consideration.
The UK economy has proved more resilient than many expected during 2026, but higher energy costs are threatening to complicate the inflation outlook. Our report notes that markets were pricing in around 100 basis points of Bank of England rate increases over the following year at the time of writing.
The Bank of England’s 5 November interest-rate decision will consequently be one of the most closely watched events of the quarter.
If policymakers become more concerned about second-round inflationary effects, expectations for UK interest rates could shift quickly. Conversely, weaker economic data could make the path considerably less straightforward.
Energy remains a risk
The consequences of the energy crisis continue to extend well beyond the oil and gas markets.
Europe entered October with gas storage levels of around 70%, below levels seen at the same point in recent years, while wholesale natural gas prices had risen sharply compared with a year earlier. SCB_QF Autumn 2026 (1)
For businesses, higher energy prices can feed through into transport, production and supplier costs, while simultaneously influencing inflation and central bank policy.
This interaction between energy, inflation and interest rates is one reason currency risk cannot be considered in isolation from wider treasury and cashflow planning.
AI and El Niño add new sources of uncertainty
Not every risk facing businesses comes from traditional economic policy.
Investment in AI infrastructure has become an increasingly important contributor to US economic growth. But questions remain about valuations, borrowing costs and just how much of America’s economic momentum has become dependent on the technology investment cycle. SCB_QF Autumn 2026 (1)
Weather could provide another source of disruption.
Our strategist’s key chart examines the potential consequences of a powerful El Niño, particularly for agricultural commodities. Sugar and rice have historically been especially vulnerable to the weather pattern, while disrupted harvests and supply routes could ultimately feed through into food inflation. SCB_QF Autumn 2026 (1)
For businesses already managing higher financing, wage and energy costs, another supply-side inflation shock would be unwelcome.
Three dates businesses should watch in Q4
There are dozens of economic releases capable of moving currency markets between now and the end of December, but three dates stand out in our latest forecast:
- 28 October – UK Autumn Budget
- 3 November – US midterm elections
- 5 November – Bank of England interest-rate decision
The proximity of those events means just an eight-day period could prove particularly important for companies with upcoming currency requirements.
Download the Q4 2026 Quarterly Forecast
Nobody can know precisely where exchange rates will move next and that is precisely why understanding the range of potential outcomes matters.
Our latest Quarterly Forecast brings together major-bank currency forecasts, analysis of the UK, US and European economies, key market-moving dates and the principal risks we believe businesses should be considering between now and the end of the year.
Download our Quarterly Forecast to explore the full outlook for GBP/USD, GBP/EUR and EUR/USD and prepare your business for the months ahead.
Smart Currency Business works with UK companies to understand and manage their foreign currency exposure, helping finance teams build strategies around their individual cashflow, budget and international payment requirements.
