A stronger British Pound against the US Dollar features in BofA’s forecasts, with GBP/USD reaching 1.37 by end-2026 despite UK policy uncertainty.
Foreign currency strategists at Bank of America see the Pound Sterling recovering against the US Dollar by year-end, but want greater clarity on UK policy before taking a more positive near-term view.
Its recent exchange rate forecasts/predictions show GBP/USD at 1.37 at end-2026, 1.45 at end-2027 and 1.47 at end-2028.
The Pound to Dollar exchange rate traded near $1.3209 on Tuesday morning, down 0.08%, after slipping 0.15% on Monday.
That leaves BofA’s year-end forecast approximately 3.7% above the current rate, following September’s 2.10% decline.
“Elsewhere, we maintain a constructive medium-term view on GBP but prefer to await greater clarity on UK policies.”
Pound Sterling: BofA sees improvements beyond interest rates
The bank argues that Sterling has become less vulnerable to fiscal concerns than other major currencies, despite the approaching Budget.
It identifies overseas investment as one source of support:
“Sticky FDI inflows have provided a meaningful fillip to the UK’s balance of payments”
FDI means foreign direct investment, which can provide longer-lasting funding than short-term portfolio flows.
BofA also says gilts have held up better than other bond markets, helped by the Bank of England’s overhaul of its bond-sales programme.
Closer relations with Europe form another part of its argument:
“Finally, strengthening EU-UK ties now appears a more focused objective for the UK government. While serious negotiations are unlikely near-term, the prospect of all options being on the table is a medium-term positive for GBP. We stay constructive.”
US Dollar (USD) strength remains an immediate obstacle
BofA’s near-term Dollar analysis still sees scope for further gains, making its Sterling forecast a recovery call rather than an endorsement of current momentum.
Monday’s upward revision to the UK services PMI failed to prevent GBP/USD ending the day lower.
Our reading is that stronger domestic data alone may be insufficient: BofA’s case also depends on confidence in UK policy and sustained investment inflows.
Our currency coverage draws on live market data, official economic releases and published bank research.
