SocGen Sees Pound Slide Against Dollar in Early 2027

Societe Generale has forecast that the British Pound (GBP) will weaken against the US Dollar (USD) in early 2027, citing tighter UK fiscal policy as a limiting factor on interest-rate support for Sterling. The bank's analysts expect the GBP/USD exchange rate to fall to 1.33 by the first quarter of 2027, roughly 1.7% below current levels.

This forecast is based on SocGen's expectation that the UK government's tighter fiscal policy will restrain demand and make further interest-rate increases less likely, which would weaken the case for buying Sterling to earn a higher yield. While high yields have supported the Pound's relative resilience against other European currencies, SocGen argues that this advantage has limits.

The bank also expects the Dollar to weaken in 2027 after modest strength through the remainder of this year, but notes that a series of Federal Reserve rate hikes is expected to start in the weeks ahead, which would make it harder for Sterling to extend gains. Despite these headwinds, SocGen's projections leave GBP/USD at just 1.34 by the third quarter of 2027.

The latest official public-finance figures illustrate the pressure on the UK government's finances, with borrowing reaching £56.7 billion in the financial year to July, £6 billion below a year earlier but £2.3 billion above the OBR forecast.