--- title: "The British pound exchange rate hits a three-month high! Institutional divergence intensifies, what will the trend be in 2026?" type: "News" locale: "en" url: "https://longbridge.com/en/news/271756009.md" description: "The British pound has recently risen against the US dollar to 1.3562, reaching a three-month high with a cumulative increase of 4.12%. Analysts believe this is mainly due to the restoration of confidence in the budget, a decrease in market bets on interest rate cuts, and a weakening dollar. Institutions have differing views on the pound's trend in 2026; JP Morgan expects an initial rise followed by a decline, with a target price of 1.37-1.36; Bank of America is bullish, with a year-end target price of 1.45; Citigroup is bearish, predicting a drop to 1.22" datetime: "2026-01-06T08:05:29.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/271756009.md) - [en](https://longbridge.com/en/news/271756009.md) - [zh-HK](https://longbridge.com/zh-HK/news/271756009.md) --- # The British pound exchange rate hits a three-month high! Institutional divergence intensifies, what will the trend be in 2026? Investment Insights - The British pound has seen a corrective rise against the US dollar, but the domestic political environment remains unfavorable for the pound. On January 6, the GBP/USD rose to 1.3562, reaching a new high since September 2025. In the past two months, the GBP/USD has accumulated a rise of 4.12%, significantly outpacing the EUR/USD's 2.22%. \[Source: TradingView; GBP/USD trend over the past six months\] Analysis indicates that the continuous rebound of the GBP/USD is mainly due to three reasons: first, confidence restoration after the budget announcement; second, a decrease in market bets on interest rate cuts by the Bank of England; and third, a weakening US dollar. After the UK announced a better-than-expected budget in November 2025, investors reduced their short positions on the pound. In December, the Bank of England's "hawkish" stance on interest rate cuts indicated that the pace of cuts might further slow down, continuing to support the pound's rise. Currently, the market expects the Federal Reserve to cut rates twice in 2026, while anticipating one rate cut from the Bank of England, giving the pound a relative yield advantage. What will the GBP/USD trend look like in 2026? Looking ahead, institutions have divergent views on the pound's exchange rate. JP Morgan believes that, on one hand, the pound is driven by resilient economic growth and the attractiveness of carry trades, but on the other hand, twin deficits and political risks remain a drag. They forecast that the pound's exchange rate will rise initially and then fall in 2026, with a target price of 1.37 for Q1, 1.41 for Q2, 1.40 for Q3, and 1.36 for Q4. Bank of America is bullish on the pound. They believe that after the UK fiscal budget is implemented, the fiscal policy risk premium will dissipate, and policies will drive a corrective rise in the pound after the release of event risks, with expectations of interest rate cuts by the Bank of England already fully reflected in current prices. Bank of America predicts that the GBP/USD will rise steadily in 2026, with a year-end target price of 1.45. Citigroup, on the other hand, is bearish on the pound, stating that the local elections in May may exacerbate political uncertainty in the UK, and that the Bank of England will accelerate the easing cycle in the second half of 2026. They expect the GBP/USD to fall to 1.22 in 2026 ### Related Stocks - [C.US](https://longbridge.com/en/quote/C.US.md) - [JPM.US](https://longbridge.com/en/quote/JPM.US.md) ## Related News & Research - [AXQ Capital LP Takes $1.79 Million Position in Crown Holdings, Inc. $CCK](https://longbridge.com/en/news/288383010.md) - [ERock Announces Launch of Initial Public Offering](https://longbridge.com/en/news/288261885.md) - [Abolish the energy price cap. Competition will bring costs down](https://longbridge.com/en/news/287802510.md) - [‘John Lewis is refusing to honour a £300 gift card I was saving for my first child’](https://longbridge.com/en/news/288058138.md) - [UK homeowner turns solar profit during record heatwave](https://longbridge.com/en/news/288203742.md)