**Credit Agricole Pound to Dollar Forecast: GBP/USD Seen at 1.33 by End-2026**
*Based on original reporting by Tom Holian for ExchangeRates.org.uk*
The global foreign exchange landscape frequently faces seismic shifts due to macroeconomic changes, monetary policy pivots, and political developments. Nowhere is this more evident than in the performance of the British Pound (GBP) against the US Dollar (USD), a pairing that remains one of the most actively traded in the world. According to the latest research and FX strategy updates conducted by Credit Agricole, the financial services giant, sterling is poised for gradual but steady appreciation against the dollar through the next two years, with their analysts predicting that GBP/USD could reach 1.33 by the end of 2026.
This forecast, detailed in a recent feature by Tom Holian, reflects both expectations for global financial conditions and a nuanced view of the UK and US economies. Below, we explore the underlying drivers guiding the GBP/USD forecast, examining market expectations, economic fundamentals, and broader trends set to shape the foreign exchange markets in the coming years.
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## The Current GBP/USD Landscape
The GBP/USD exchange rate has experienced significant volatility since the start of the decade, moving through extremes in response to the COVID-19 pandemic, Brexit fallout, and divergent monetary policy signals from both the Bank of England (BoE) and the US Federal Reserve (Fed). Typically, the pound’s fortunes are closely linked not only to UK domestic economic performance but also to international risk appetite and perceptions of the country’s fiscal health.
Key context points include:
– After hitting multi-decade lows in the aftermath of Brexit referendum and during the pandemic, GBP/USD recovered as financial markets stabilized, and growth prospects brightened.
– Throughout 2023 and into 2024, the pair traded in a relatively narrow range, with both economies facing inflationary pressures and central banks opting for tighter monetary conditions.
– Recent months have seen speculation about interest rate cuts intensify, with investors watching for clear signals from both the BoE and Fed on the direction and timing of policy adjustments.
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## Drivers Behind the Pound-to-Dollar Outlook
Credit Agricole’s FX outlook is structured around the interplay between monetary policy cycles, growth prospects, yield differentials, and capital flows. Their prediction of GBP/USD at 1.33 by end-2026 is grounded in several key themes:
### 1. Expected Central Bank Policy Shifts
– **UK Monetary Policy:** The Bank of England is anticipated to proceed cautiously with interest rate adjustments. Despite progress on inflation, persistent wage growth and underlying price pressures mean that rate cuts could be gradual and limited in scope compared to previous cycles.
– **US Federal Reserve:** The Fed is also expected to begin its own easing cycle, but Credit Agricole projects the US central bank will move more swiftly and aggressively than its UK counterpart. This eventual “pivot” is forecast to erode the interest rate advantage that has recently benefited the dollar.
– **Yield Differentials:** Narrowing UK-US interest rate spreads should lend support to the pound, reducing foreign capital inflows to USD assets and making sterling relatively more attractive.
### 2. UK Economic Fundamentals and Growth Prospects
– Despite a sluggish start to the decade and lingering post-Brexit challenges, the UK economy is expected to stage a modest recovery as inflation falls, real incomes stabilize, and business investment resumes.
– Political stability and a potential reduction in fiscal uncertainty following possible general elections could further underpin market sentiment toward UK assets and the pound.
– Improved UK-EU relations, especially with regards to trade and regulatory alignment, may also stabilize investor expectations.
### 3. Structural and Global Factors
– **Global Risk Sentiment:** The status of GBP as a ‘risk-sensitive’ currency means that global risk appetite remains important for its outlook. A less hawkish Federal Reserve and stable international conditions could encourage greater flows into higher-yielding assets, supporting sterling
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