Gbpusd Will Rally Mufg

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Gbpusd Will Rally Mufg

GBP/USD Will Rally Despite Sterling Weakness

The latest forecast from MUFG shows GBP/USD will rally in 2026 despite the Sterling's underperformance. This comes at a time when GBP/USD is in a bearish trend and continues to trade below 1.40.

As per MUFG's forecast, the Pound Sterling has already shown strength against G10 currencies in the last few months. This was mostly driven by the global US Dollar weakness and the market's concerns over US policy.

More Rate Cuts In UK During 2026

What really helped the Pound Sterling was the fact that the BoE is now less likely to lower the interest rates. On top of that, the UK data in the last few months was also firm.

Last but not least, the GDP data also showed growth, which was helpful for the GBP. MUFG added that inflation and wage growth are also supporting the GBP.

Looking ahead, the earnings growth of the private sector will slow down in the UK. But it is very close to the levels seen when price stability is achieved. This tells us that the policy easing might happen later this year.

As per MUFG's forecast, the next rate cut from the Bank of England will be in May. After that, the next one will be in August 2026, which will lower the rate to just 3.25%.

One key risk for the GBP is that political uncertainty could invite volatility to the pair. And if we see pressure in the UK government bonds market, it could also affect the GBP.

Despite the upcoming rate cuts in the UK, the GBP will remain strong in the GBP/USD pair. The reason is that the US Federal Reserve is also likely to cut the rates in 2026.

In fact, the pace of rate cuts in the US could even outmatch the pace of rate cuts from the BoE. If that happens, the MUFG's forecast will become a reality & we could see an upside move in GBP/USD.

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