Morgan Stanley
2026 FX Outlook: The Year of Pivots
LIVE20 November 2025USD bearish
Back to CurrenciesStrongly Bullish
GBP/USD
The year of sterling
MS Forecast Path
Cross-Firm Forecast Comparison
Key Drivers
UK GDP growth
BoE rate path
Fiscal policy credibility
FDI inflows
EUR/GBP cross dynamics
All Firm Targets (Dec '26)
MSStrongly Bullish1.4700
DBBullish1.4200
BARCBullish1.4100
MUFGModerately Bullish1.4000
BofABullish1.4000
JPMTactically Bullish1.3600
GSModerately Bullish1.3600
INGModerately Bullish1.3600
Key Issues for 2026
1.Top G10 pick - GBP to reach highest level since early 2022
2.UK growth resilience driven by services sector and real wage gains
3.BoE gradual easing pace (25bp/quarter) maintains yield advantage
4.Post-budget fiscal credibility removes tail risk
5.Foreign direct investment inflows support structural GBP demand
Risk Scenarios
Very bullish1.50+
UK growth accelerates above 2%, BoE pauses easing
Base case1.45-1.47
Steady UK growth, gradual BoE easing, fiscal stability
Bear case1.28-1.32
UK recession, BoE accelerates cuts, fiscal concerns return
Analysis Summary
GBP is our top G10 pick for 2026. UK growth resilience, attractive carry, and fiscal credibility post-budget support sterling. Cable to reach 1.47 by Q4, the highest since early 2022. EUR/GBP to decline steadily as UK outperforms eurozone.