**RBC Pound to Dollar Forecast: GBP/USD to Rally to 1.38 by 2027**
*Based on the article published by James Fuller at ExchangeRates.org.uk.*
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## Overview
With economic volatility abounding, global markets remain fixated on volatile exchange rates. Of particular interest is the GBP/USD pair, commonly known as “Cable.” Coming off a period of heightened global uncertainty, the Royal Bank of Canada (RBC) has issued an updated long-term outlook for the pound to US dollar exchange rate, projecting a moderate but sustained rally in the years ahead.
This article presents the key takeaways and insights from RBC’s recent exchange rate forecasts, specifically referencing the GBP/USD path all the way to 2027. We break down the fundamental drivers, highlight economic and monetary policy influences, and detail strategic currency market insights derived from the referenced article at ExchangeRates.org.uk by James Fuller.
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## Current Market Backdrop
The foreign exchange market landscape as of mid-2024 has been defined by the persistent tug-of-war between central bank policies, economic growth, inflation, and risk sentiment. The GBP/USD exchange rate has experienced significant fluctuations, influenced by factors such as:
– Disparate paths for monetary policy between the Federal Reserve and the Bank of England
– Ongoing concerns over UK growth prospects post-Brexit
– US dollar strength driven by safe-haven flows and resilient economic data
– Increased market volatility amid geopolitical tensions and global economic friction
Crucially, investors and businesses alike remain mindful of how these macroeconomic and structural drivers will impact the GBP/USD exchange rate over the coming years.
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## RBC’s Sterling Outlook: Key Forecasts
RBC, one of Canada’s largest banks and a widely followed institutional FX forecaster, recently released new projections for key currency pairs. Their expectations for GBP/USD are detailed and extend well into the medium and long term.
### Headline Numbers
– **End-2025 GBP/USD forecast:** 1.35
– **2026 outlook:** 1.37
– **Target for end-2027:** 1.38
This implies a steady advance in the pound’s value versus the US dollar, contrasting with the instability witnessed through much of the post-pandemic period.
#### Quarterly Projections
RBC’s quarterly breakdown for GBP/USD is as follows:
– **Q3 2025:** 1.33
– **Q4 2025:** 1.35
– **Q1 2026:** 1.36
– **Q2 2026:** 1.36
– **Q3 2026:** 1.37
– **Q4 2026:** 1.37
– **Q1 2027:** 1.37
– **Q2 2027:** 1.37
– **Q3 2027:** 1.38
– **Q4 2027:** 1.38
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## What’s Driving RBC’s Optimism on Sterling?
Several pillars support RBC’s GBP/USD forecast. These range from expectations around monetary policy to macroeconomic rebalancing and relative dollar weakness.
### Anticipated BoE Policy Normalisation
– The Bank of England is expected to cut interest rates more gradually compared to other major central banks such as the Federal Reserve and the European Central Bank.
– The relatively cautious approach is based on persistent UK inflation risks and concerns over underlying price pressures.
– RBC analysts argue that a more patient BoE will provide support for GBP by maintaining a relatively appealing yield versus other reserve currencies.
### Shifting US Dollar Dynamics
– The US dollar enjoyed broad strength through much of 2022 and 2023, buoyed by aggressive Fed rate hikes and global safe-haven demand.
– RBC forecasts a period of dollar consolidation and modest weakening as US growth outperformance fades and rate cuts become more likely in 2025.
– Lower US policy rates, a
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