The British Pound (GBP) has shown some strength following the Bank of England’s (BoE) recent decision to lower interest rates. While the reduction to 3.5% was expected, the indication that future rate cuts may not come as quickly suggests a more cautious approach going forward. This has allowed the GBP to firm up, particularly as markets react positively to the potential for a balanced monetary policy amid signs of slowing inflation and economic growth.
Looking at recent exchange rates, the GBP to USD is currently at 1.3448, which is a 7-day low but still 1.1% above its 3-month average of 1.3304. This pair has remained relatively stable, trading within a range of 1.3019 to 1.3505 recently. Meanwhile, the GBP to EUR stands at 1.1458, hovering just above its 3-month average, and has been stable within a 1.8% band. The GBP to JPY is currently trading at 210.9, which is a significant 2.7% above its 3-month average of 205.3, reflecting stronger performance against the Japanese Yen.
Looking ahead, analysts expect continued pressure on the pound due to various factors. The BoE is projected to cut rates again, likely reaching 3.25% by mid-2026 as inflation slows and growth decelerates further. This downward adjustment in monetary policy, along with budgetary concerns from the UK government and the potential impact of U.S. tariffs, may contribute to a cautious outlook for the GBP.
On the forecast front, Nordea predicts the GBP/USD exchange rate might strengthen to 1.41 by the end of 2026, fueled by anticipated dollar weakness, while Mizuho expects a more conservative hold at around 1.33. Overall, while the GBP has shown signs of resilience, external and domestic economic pressures may hinder its progress. Keeping an eye on key economic indicators, such as retail sales figures, will be essential for those involved in international transactions, especially importers and exporters, as these will guide future exchange rate movements.
