UBS: Pound Sterling Will Overcome Potential Headwinds, End-2025 GBP/USD Forecast 1.35 - Exchange Rates Org UK

What the desk is arguing

The desk believes that the Pound Sterling will successfully overcome the economic headwinds facing the UK, as suggested by UBS's end-2025 forecast of 1.35 for GBP/USD. This optimistic view reflects confidence in the Bank of England's ongoing policies to support economic recovery, which are crucial given that the recent consensus target for March 2026 stands at 1.3450.

UBS’s position is mirrored by other leading firms, with targets ranging from 1.3200 to 1.3800 for the same period, reflecting a collective expectation of moderate appreciation ahead. Lifting a central bank's rate too quickly could indeed threaten domestic growth; however, the desk anticipates that the BoE will strategize carefully to balance inflation control with economic expansion.

Where it sits in our coverage

Current consensus for GBP/USD indicates a target of 1.3450 with a range of 1.3200 to 1.3800 for March 2026. Notable targets include: - goldman: 1.3600 - jpmorgan: 1.3700 - morganstanley: 1.3800

In comparison, UBS's forecast of 1.3500 for December 2026 falls at the lower end of the consensus. This positions them slightly more conservatively than firms like morganstanley, whose outlook appears more bullish over the same tenor.

How other firms see it

Aligned with the desk's outlook, firms such as goldman and jpmorgan project similar appreciation in GBP, suggesting a broad-based confidence in a GBP recovery. On the contrary, citi presents a more bearish stance, forecasting targets as low as 1.2400, which suggests growing concerns over the UK's economic landscape.

Given the tight correlation between GBP/USD and the anticipated actions of the Bank of England, traders should also keep an eye on the EUR/USD dynamics as they reflect similar rate paths influenced by the respective central banks' policies.

What the calendar says

No significant events are scheduled in the upcoming 30 days, allowing the market to concentrate on underlying economic fundamentals without disruptive catalysts. This unobtrusive environment might facilitate more steady positioning in the GBP as it evolves towards UBS's forecasted levels.