Market News

Investing.com -- The British GBP/USD is expected to continue its upward trend against the U.S. dollar, with UBS forecasting GBP/USD to reach 1.40 by September 2026.

In a recent report, UBS analysts Patrick Ernst and Constantin Bolz noted that GBP/USD has recovered most of its July dip, primarily due to a short-lived USD rebound. The currency pair has re-established the 1.35 level, with further potential gains anticipated.

U.K. factors have also supported the pound’s strength, with the latest Bank of England meeting being interpreted as hawkish. The U.K.’s July inflation data further reinforced this sentiment and provided additional support for the GBP.

UBS expects the dollar weakness trend to continue for the rest of the year, though with some volatility. Factors weighing on the dollar include the outlook for lower Federal Reserve rates, policy uncertainty from the White House, the new US fiscal package, and international investors shifting toward higher hedge ratios for dollar assets.

The Bank of England is expected to implement rate cuts only on a quarterly basis due to persistent inflationary pressures. This positions the pound as a leading carry trade candidate within the G10, comparable to the high-yielding USD.

UBS has set a year-end target of 1.39 for GBPUSD, with forecasts of 1.39 for March 2026, 1.40 for June 2026, and 1.40 for September 2026.

The analysts identified 1.33 as a major support level from current positions, while 1.38 represents an important resistance level that will likely be broken later this year.

Risk factors to this outlook include a more protracted easing of the U.K. labor market, inflation falling more quickly than expected, potential issues with the U.K.’s fiscal situation, and the possibility of the Federal Reserve adopting a more hawkish stance than anticipated.