Pound To Dollar Rate Tipped At 1.33 By 2026 Say BNP Paribas

Foreign exchange analysts at BNP Paribas predict that the US Dollar will gain further support from yields and overall US fundamentals.

Although the bank is positive on the Pound Sterling , it will be a slow uphill battle to secure GBP/USD gains. The end-2024 forecast is 1.28 with a net advance to 1.33 at the end of 2025.

As far as the politics is concerned, BNP considers that the UK General Election is a slight positive for the Pound amid expectations of fiscal prudence and growth-orientated policies by an incoming Labour government.

It expects the Bank of England will cut interest rates in August with a further two cuts by the end of 2024.

With the Fed having to tread carefully, it expects that US yields will be above equivalent UK levels throughout the forecast period, limiting potential Pound buying.

As far as the US election is concerned, the bank considers that there are upside risks to the dollar, especially if there is a Republican clean sweep.

BNP expects that the dollar overall will remain strong unless there is notable deterioration in fundamentals.

Nevertheless, an important element is that the dollar is substantially overvalued at current levels.

According to BNP, the dollar index is overvalued by more than 20% which will be an important headwind for the currency.