Outlook
The GBP remains muted and rangebound as tariff risk and domestic data temper the mood. US tariff plans could trim UK GDP by about 0.7% over the coming years, feeding a cautious growth outlook. The next UK jobs release is expected to show unemployment falling in November but with wage growth easing, contributing to a mixed domestic picture.
Markets expect a cautious BoE stance, with two 25bp cuts pencilled in for 2026, taking the Bank Rate to around 3.25%. With 2026 growth seen near 0.9% and inflation easing toward 2% later in the year, sterling may continue to drift in a narrow range as traders weigh global trade tensions and geopolitical risk.
Key drivers
- BoE policy path: Markets anticipate two 25bp rate cuts in 2026, shaping the pound’s trajectory.
- Growth and inflation: UK GDP growth around 0.9% in 2026; inflation easing toward the 2% target by late 2026.
- Trade/tariffs: US tariff plans threaten UK exports and GDP, contributing to a softer GBP.
- Global risk sentiment: Ongoing US-China tensions and regional conflicts can keep demand for safe-haven assets elevated, affecting sterling.
- Near-term price action: The pound has shown limited directional momentum, with recent levels reflecting a cautious stance.
Range
GBPUSD is near 1.3440, its 7-day high, about 1.0% above its 3-month average of 1.3311, after trading in a roughly 4.0% range from 1.3019 to 1.3543.
GBPEUR is around 1.1460, near 14-day lows and just above its 3-month average, having traded in a stable ~2.0% range from 1.1322 to 1.1551.
GBPJPY sits near 212.5, about 2.5% above its 3-month average of 207.4, having moved in a range from 200.0 to 213.7.
