GBP/USD Forecast: UBS Unlocks Opportunity Amidst Dollar Weakness - Bitcoin World

What the desk is arguing

UBS has identified a tactical opportunity in GBP/USD, arguing that the dollar's recent weakness is set to persist given softening US economic data and expectations of Fed easing. The desk views cable as undervalued relative to fundamental fair value models, particularly as UK inflation remains sticky and the BoE is likely to hold rates higher for longer.

Supporting evidence includes the breakdown of dollar-positive correlations and the resilience of UK services PMIs, which have consistently outpaced US equivalents. Technicals show GBP/USD holding above the 200-day moving average, with momentum oscillators pointing to further upside.

The desk implicitly rejects the narrative that UK fiscal risks or political uncertainty will derail the pound's rally, citing improved Gilt market functioning and a narrowing of the UK risk premium since the spring budget.

Where it sits in our coverage

Our consensus median targets for GBP/USD are 1.3500 by March 2026 and 1.4000 by December 2026, with a wide dispersion from 1.3600 to 1.4700 at the year-end horizon. Current spot at 1.3100 implies a 2.9% upside to the near-term consensus. UBS's bullish view aligns closely with the median but is less aggressive than the most optimistic forecasts.

Several major firms have published end-2026 forecasts above consensus: - Morgan Stanley: 1.4700 - Deutsche Bank: 1.4200 - Barclays: 1.4100 - MUFG: 1.4000 - BofA: 1.4000

Morgan Stanley stands out as the most bullish, while Goldman Sachs at 1.3600 and JPMorgan at 1.3600 represent the more cautious end.

How other firms see it

Morgan Stanley is aligned with the bullish bias but goes further, targeting 1.4700 by December 2026, citing UK macro outperformance and a structural dollar decline. Deutsche Bank and Barclays are similarly constructive, with year-end targets of 1.4200 and 1.4100, respectively.

On the contrary side, Goldman Sachs and JPMorgan are more cautious, with December 2026 targets of 1.3600. ING also prints a modest 1.3600, suggesting they see limited upside beyond current levels. Pockets of skepticism remain around UK growth sustainability and the risk of a renewed dollar bid.