**UK Pound to Dollar Forecast: Credit Agricole Projects GBP/USD at 1.33 by End-2026**
*Source Credit: By James Buckley, as reported on ExchangeRates.org.uk*
The GBP/USD currency pair has seen heightened volatility in 2024, influenced by divergent economic growth trajectories, central bank policy pathways, and global financial risk sentiment. As the global macroeconomic landscape gradually transitions towards a new post-pandemic equilibrium, investors have been recalibrating their views on the British pound and the US dollar. According to a detailed analysis published by ExchangeRates.org.uk, Credit Agricole CIB Research has weighed in with a forward-looking forecast that expects the Pound to Dollar (GBP/USD) exchange rate to advance to 1.33 by the end of 2026.
### Current Market Landscape: Pound-Dollar Fundamentals
The GBP/USD rate has fluctuated substantially in recent quarters, generally moving between 1.25 and 1.28 throughout much of 2024. Diverging monetary policies between the Bank of England (BoE) and the US Federal Reserve (Fed) continue to exert significant influence on the pair’s direction. In periods of global uncertainty, the US dollar often benefits from safe-haven flows, while the pound’s performance is more sensitive to domestic growth outlooks and risk sentiment.
#### Key Factors Shaping GBP/USD Performance in 2024
Credit Agricole’s GBP/USD outlook considers several macroeconomic and policy dynamics:
– **Monetary Policy Divergence:**
– The US Fed paused its tightening cycle in late 2023 but kept rates elevated, while the BoE signaled an eventual pivot toward easing due to slower UK economic growth.
– Market participants expect near-term interest rate cuts from both central banks, but the anticipated trajectories differ. The BoE is perceived as more dovish given UK macroeconomic vulnerabilities.
– **Growth Outlooks:**
– UK economic growth remains subdued with rising risks of stagnation. The post-Brexit trade realignment and cost-of-living crises further complicate recovery.
– The US, meanwhile, has demonstrated resilient economic activity, supported by consumer demand and robust labor markets.
– **Inflation Trends:**
– UK inflation has decelerated from its prior multi-decade highs, but above-target price pressure lingers. Wage growth and services inflation persist, creating policy challenges for the BoE.
– US inflation also moderated, allowing for speculation of Fed policy easing, but sticky core readings keep the outlook uncertain.
– **Global Risk Sentiment:**
– Ebbing risk appetite temporarily boosts the dollar, but global stabilization and higher UK yields support the pound in risk-on markets.
### Credit Agricole’s Views on GBP/USD
Credit Agricole’s latest research note examines both the near-term and medium-term trajectory for GBP/USD, identifying stages in the pair’s likely evolution as macroeconomic themes play out.
#### Short-Term Outlook: GBP/USD to Trend Sideways
– In the remainder of 2024 and into early 2025, Credit Agricole expects GBP/USD to trade broadly sideways, with frequent oscillations between 1.25 and 1.28.
– The main determinants for price action will be:
– Shifting market expectations for the sequencing and pace of BoE and Fed interest rate cuts
– Surprises in macroeconomic data, especially related to growth and inflation
– Fluctuations in global risk appetite
#### Medium-Term: Gradual Sterling Appreciation
– As the UK economy stabilizes and global financial conditions ease, Credit Agricole anticipates a gradual uptrend in GBP/USD. Key drivers include:
– Receding energy price shocks that previously battered the UK consumer sector and trade balance
– Progress in post-Brexit adjustment, reducing the investment risk premium on British assets
– Easing of monetary policy at both the BoE and the Fed, leading to a shift in currency market dynamics if
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