BofA Forecasts Pound to Reach 1.37 Against Dollar by 2026

Bank of America (BofA) predicts a stronger British Pound against the US Dollar, forecasting GBP/USD to reach 1.37 by the end of 2026. This outlook comes despite ongoing policy uncertainty in the UK. The bank's foreign currency strategists see the Pound recovering by year-end but caution that greater clarity on UK policies is needed before adopting a more positive near-term view.

The current GBP/USD exchange rate stands near $1.3209, down slightly from earlier this week. BofA's forecast for 2026 represents a 3.7% increase from the present rate, following a 2.10% decline in September. The bank's predictions extend beyond 2026, with GBP/USD expected to hit 1.45 by the end of 2027 and 1.47 by the end of 2028.

BofA highlights several factors supporting the Pound's medium-term outlook. These include reduced vulnerability to fiscal concerns compared to other major currencies, sustained foreign direct investment (FDI) inflows, and stronger performance of UK gilts relative to other bond markets. The bank also notes the potential for improved EU-UK relations, which could further bolster the Pound.

However, BofA acknowledges that the near-term strength of the US Dollar poses an obstacle to immediate gains for the Pound. The bank's analysis suggests that stronger domestic data alone may not be sufficient to drive Sterling's recovery, emphasizing the need for confidence in UK policy and continued investment inflows.