MUFG
2026 FX Outlook: Post-Peak USD World
LIVE19 December 2025USD bearish
Back to CurrenciesModerately Bullish
GBP/USD
Steady gains but not the star
MUFG Forecast Path
vs Prior ForecastCurrent target: 1.4Prior target: 1.38Revision: +1.4%
Cross-Firm Forecast Comparison
Key Drivers
BoE rate path
UK GDP growth
Fiscal policy
EUR/GBP dynamics
US growth spillover
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.GBP benefits from broad USD weakness but not our top pick (differs from MS)
2.BoE gradual easing maintains yield advantage vs EUR
3.UK growth resilient but faces fiscal headwinds in H2
4.EUR/GBP to remain range-bound as both currencies strengthen vs USD
5.Cable tops out at 1.40 - less aggressive than Morgan Stanley's 1.47
Risk Scenarios
Bull case1.43-1.45
UK growth accelerates, BoE pauses, fiscal credibility improves
Base case1.38-1.40
Steady UK growth, gradual BoE easing, broad USD weakness
Bear case1.25-1.30
UK recession, BoE accelerates cuts, fiscal concerns resurface
Analysis Summary
GBP to benefit from broad USD weakness and UK growth resilience. BoE gradual easing maintains yield advantage vs EUR. Cable to reach 1.40 by Q3 before stabilizing. Less bullish than Morgan Stanley given UK fiscal headwinds in H2.