GBP/USD Outlook: Goldman and Westpac Clash on Sterling's Future Direction

Analysts at Goldman Sachs and Westpac are offering sharply different forecasts for the Pound Sterling's performance in 2027. Goldman expects its recent advantages to fade, predicting a target of 1.28 in twelve months. In contrast, Westpac forecasts a 2027 recovery even with US interest rates staying high, targeting 1.38 for September and rising to 1.39 that December.

The Pound to US Dollar exchange rate (GBP/USD) has recovered slightly after dipping to 1.3329, standing at around 1.3369 on Tuesday. The recovery comes despite Goldman's prediction of a November hike by the Bank of England following last week's 6-3 vote to hold rates at 3.75%. However, Goldman believes that markets anticipate too much further tightening and that recent stability likely extends for the next few weeks.

Westpac also expects restrained UK tightening, predicting only one hike into year-end. Its Sterling recovery accompanies a US rate outlook that allows no cuts next year, but instead rates will not be seen until 2028. Westpac forecasts the Pound at 1.40 by December 2028.