FX Daily: The big GBP short unwinding continues
At a Glance
The desk maintains a bullish outlook on GBP as positioning shifts occur amidst a weakened USD landscape, driven by easing inflation pressures. Per the full note from ing-think, the ongoing unwinding of GBP shorts, alongside political changes such as Shabana Mahmood's potential role as chancellor, has contributed to the pound’s recent strength. Despite the dollar's soft PPI print showing a -0.3% month-over-month change, the overall market sentiment suggests limited further downside for the USD, particularly given geopolitical tensions points to higher volatility. The current consensus for GBP indicates a target of 1.3500, affirming its upward trajectory against the backdrop of diverging central bank policies.
Key Takeaways
Full Analysis
What the desk is arguing
The desk frames this as a compelling GBP bullish scenario as significant short positions are being unwound in the currency. Recent positioning changes have resulted in sterling emerging as a key outperformer, with supportive factors including the political landscape and discouraging economic prints from the USD. Frantisek Taborsky and Francesco Pesole highlighted that political appointments could subtly bolster confidence in GBP, underscoring the currency's resilience.
Supporting this bullish view, the desk notes the dollar remains pressured after disappointing PPI and CPI data showed only muted inflationary pressures, with a core PPI print at just 0.2% month-over-month. The expectation is that the Fed will likely pause its hiking cycle unless a clearer disinflationary trend solidifies, which means tactical shifts in USD positions are essential to monitor going forward.
Where it sits in our coverage
Our current consensus for GBP places it at 1.3500, with a range mostly bounding around 1.2400 to 1.3800 based on several institutional outlooks. Key targets from notable firms include: - Goldman: Mar26 1.3300, Jun26 1.3500, Dec26 1.3600 - Scotiabank: Mar26 1.3607, Jun26 1.3738, Dec26 1.3800 - JPMorgan: Mar26 1.3700, Jun26 1.4100, Dec26 1.3600
This outlook is in line with cross-firm expectations which show a strong consensus around GBP's current price level for March 2026, with most firms projecting slight upward movement relative to the current spot. Notably, BOFA stands out with a more conservative target of 1.3400 for Mar26, positioning it on the lower end of the spectrum.
How other firms see it
A number of firms are aligned with our bullish GBP stance, including Goldman and JPMorgan, both anticipating appreciable gains over the coming months. Conversely, firms such as Citi show a more cautious approach, projecting lower targets that might not align with current bullish sentiments. This divergence reflects varying assessments of inflation dynamics and geopolitical influences.
Related currency pairs to keep an eye on include EUR/GBP, given the ongoing divergence in monetary policies influenced by ECB rates, as well as the USD/JPY, which will react alongside the Fed's decisions and broader dollar movements.
Market Implications
Traders should watch the upcoming U.S. retail sales data, set to be released soon, as it will provide further insights into consumer sentiment and potential impacts on the Fed's monetary policy. The level of 1.3500 for GBP/USD is critical, as any sustained breach could amplify bullish sentiment and target higher ranges above this threshold.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
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Articles FX Daily: The big GBP short unwinding continues Published 07:30 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar stayed under pressure as PPI confirmed that inflation pressure eased in June. Still, with the Gulf situation apparen
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4 itemsFX Daily: Lack of GBP political premium cuts both ways
The desk interprets the recent calm in GBP markets as a sign of strengthening trust in potential leadership change, but with a cautionary note regarding future fiscal pressures. Per the full note from ing-think, the apparent lack of political premium in GBP indicates possible vulnerability should risks materialize again, especially against a backdrop of U.S. monetary policy tightening. With no significant high-impact data on the horizon, focus turns to Fedspeak this week, especially regarding potential interest rate movements, which could overshadow GBP dynamics. Current consensus for GBP stands at 1.3400, reflecting mixed outlooks among major banks, while conditions surrounding the USD remain ripe for potential volatility.
Sterling’s rally is not built to last
The desk interprets the recent rally in sterling as unsustainable, driven more by positioning and speculative flows than by substantial improvements in UK fundamentals. Per the full note from ING, with expectations of lower short-dated rates and renewed fiscal risks, the desk anticipates a reversal of these gains as we approach year-end. Current consensus targets for GBP remain relatively clustered around 1.35, indicating that most market participants align with the view that any further upward momentum is limited. The lack of high-impact upcoming events further diminishes the likelihood of sterling sustaining its gains in the near term.