RBC Capital Markets maintains a short-term bearish outlook on the Pound, but sees room for a medium-term rebound.
According to the bank’s projections, the pair is unlikely to post a meaningful change by the end of 2025. However, by the end of the following year RBC expects GBP/USD to climb toward 1.43 as the US dollar starts to lose momentum.
Interest rates. RBC expects a rate cut at the December meeting, especially after this month’s exceptionally narrow vote. The bank also warns that long-term market expectations for the terminal rate — just below 3.50% — represent a downside risk for the Pound.
RBC also highlights near-term risks ahead of the UK budget release, noting that traders may step up Pound selling if fiscal headlines disappoint.
Even so, the bank argues that markets may already have reached a peak level of pessimism regarding fiscal policy. In that case, there is room for a relief bounce if the government manages to restore policy credibility.
RBC further notes that investors currently hold an overly negative view of the UK’s economic growth outlook.
The key point in RBC’s forecast is that the US dollar is expected to weaken in 2026 as global capital flows gradually shift away from the greenback. According to the bank, this macro trend will be a major tailwind for GBP strength.