GBP/XCD Outlook: The outlook is slightly positive, but likely to move sideways as the GBP is trading above its recent average but lacks a clear direction currently.
Key drivers:
• Rate gap: The Bank of England's cautious approach to rate cuts contrasts with the East Caribbean Central Bank's efforts to enhance macroeconomic stability, creating pressure on the GBP.
• Risk/commodities: With oil prices running high and global inflationary pressures still present, this situation can subtly buoy the GBP against the XCD, even as UK economic data remains limited.
• One macro factor: The UK's projected GDP growth slowdown to 0.9% in 2026 reflects ongoing economic challenges and may hinder stronger GBP performance.
Range: GBP/XCD is likely to drift within its recent 3-month range as it stabilizes above the average.
What could change it:
• Upside risk: A stronger-than-expected recovery in UK economic data could renew GBP demand.
• Downside risk: Heightened geopolitical tensions or significant slowing in the Caribbean's economic growth could pressure the XCD.