**Credit Agricole Pound to Dollar Forecast: GBP/USD at 1.33 by End 2026**
*Based on the analysis and reporting by James Harte. Original article at ExchangeRates.org.uk.*
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The British Pound (GBP) to US Dollar (USD) exchange rate has been under significant scrutiny amid shifting global financial dynamics and evolving monetary policies. With persistent inflationary pressures, diverging central bank outlooks, and uncertain political landscapes on both sides of the Atlantic, understanding the future movement of the GBP/USD pair is more crucial than ever for investors, corporates, and policymakers alike.
In their recent analysis, Credit Agricole provided a detailed long-term forecast for the GBP/USD exchange rate, projecting the pair to reach 1.33 by the end of 2026. This article interprets their findings, contextualizes them with current economic conditions, and explores the main factors that could influence Sterling-Dollar performance through the forecast horizon.
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## Current State of the GBP/USD Pair
The GBP/USD rate, also known as “Cable”, has experienced considerable volatility in recent years. The passage through Brexit, cyclical changes in monetary policy, and global events such as the COVID-19 pandemic and the Russia-Ukraine conflict have all left their marks.
**Recent Market Snapshots:**
– In 2023, the pair fluctuated mainly in the 1.20-1.30 range.
– The early part of 2024 saw additional downward pressure, with the Pound moving closer to the lower bound as Dollar strength persisted.
**Contributing Factors:**
– The Bank of England’s wariness on rate cuts in the face of sticky UK inflation.
– US Federal Reserve’s hawkish stance in response to robust US data and persistent inflation.
– Uncertainties around UK and US fiscal policy and political environments.
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## Credit Agricole’s GBP/USD Outlook
Credit Agricole’s research arm, recognized for comprehensive macroeconomic modeling, projects a gradual appreciation in the Pound against the Dollar, with GBP/USD expected to reach 1.33 by the end of 2026.
### Key Forecast Highlights
**End-2024 Projection:**
– GBP/USD seen at 1.29, slightly higher than spot rates in mid-2024.
**End-2025 Projection:**
– Pair expected at 1.30, signaling a steadier ascent as macro risks soften.
**End-2026 Projection:**
– Target set at 1.33, underpinned by anticipated economic convergence and easing US Dollar dominance.
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## Underlying Justifications for Credit Agricole’s Forecast
Credit Agricole’s model blends expectations for monetary policy, economic growth, and external imbalances. Here are the main drivers shaping their outlook:
### 1. **Diverging Monetary Policy Paths**
– **Bank of England (BoE):**
– While markets have penciled in BoE rate cuts in late 2024, the bank is likely to move cautiously as UK inflation proves resilient.
– Credit Agricole expects the BoE to lag the Federal Reserve in initiating rate cuts, providing near-term support for the Pound.
– **Federal Reserve (Fed):**
– The Fed is likely to start easing earlier than the BoE due to evidence of slowing US economic momentum and gradually normalizing inflation.
– As US rates begin to fall ahead of the UK, the Dollar’s relative yield advantage will wane, reducing support for the greenback.
### 2. **Relative Economic Performance**
– **UK Economic Growth:**
– Credit Agricole sees the UK gradually rebounding from stagnation as inflation falls and real income growth resumes.
– Fiscal policy is expected to remain tight, but the gradual healing of the labor market and consumer activity should help mitigate recession risks.
– **US Economic Growth:**
– The US is forecast to cool following exceptional post-pandemic outperformance.
– Receding fiscal stimulus and higher rates are expected to damp
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