How have the latest macro data & political developments impacted the outlook for the GBP?

What the desk is arguing

The desk argues that recent macroeconomic indicators and political developments have created a complex environment for the GBP's valuation and the outlook for UK rates. Analysts suggest that the economic growth trajectory may affect the Bank of England's decisions, particularly if inflation remains stubbornly above target levels.

Supporting this view, the latest data indicates that while the UK economy shows resilience, inflationary pressures might push the central bank towards a cautious stance. This aligns with ongoing market sentiments regarding potential interest rate moves by the BoE.

A countervailing perspective would note that a surprising uptick in economic activity could shift the narrative, prompting a more hawkish tone from the BoE, which hasn't been fully priced into current GBP valuations.

Where it sits in our coverage

Currently, our consensus target for GBP/USD is 1.075, with a range spanning from 1.04 to 1.12. A few notable firms with forecasts include: - jpmorgan: 1.10 by Mar-26 - bofa: 1.04 by Mar-26

This view places our coverage at the upper end of the entire firm spread, indicating a relatively bullish outlook compared to some of the more pessimistic forecasts from firms like bofa.

How other firms see it

Firms such as jpmorgan and citi appear aligned with a more optimistic view of GBP, reflecting expectations of sustained growth and effective policy management. In contrast, firms like bofa maintain a more cautious stance, citing potential risks related to political instability and inflation.

Key insights to watch include the relationship between GBP and EUR/USD, particularly as both currencies respond to central bank actions and economic readings, which could illuminate broader market trends.