The pound sterling is rebounding strongly, but institutional positions are completely opposite—who will have the final say in 2026?

The recent performance of the British Pound has plunged the market into a fierce debate between “bullish” and “bearish” outlooks. On January 6, the GBP/USD reached 1.3562, hitting a high since September 2025. This means that if you hold 2,000 GBP, its USD value also rises, and the purchasing power when converted to TWD increases accordingly.

Why is the rally so fierce?

Over the past two months, GBP/USD has risen a total of 4.12%, far outperforming EUR/USD’s 2.22%. The logic behind this is actually quite simple: firstly, the UK’s November budget was better than market expectations, prompting investors to unwind their short positions on the pound. Secondly, in December, the Bank of England adopted a “hawkish” rate cut strategy, implying that future rate cuts will not be as aggressive. Thirdly, the dollar itself has been weak, providing room for the pound to rise.

Additionally, the market now expects the Federal Reserve to cut rates twice in 2026, while the Bank of England will only cut once, giving the pound a relative yield advantage over the dollar.

But here’s a big problem: opinions among institutions vary wildly.

J.P. Morgan’s view is “laugh first, cry later” — the pound is indeed supported by economic resilience and carry trade attractiveness, but the twin deficits and political risks in the UK always hang over it. The bank predicts GBP/USD will show a “high open, then decline” trend: targeting 1.37 in Q1, rising to 1.41 (the yearly high) in Q2, then falling back to 1.40 in Q3, and dropping again to 1.36 in Q4.

Bank of America, on the other hand, takes a contrarian stance and is bullish on the pound. They believe the budget has alleviated market concerns about UK fiscal risks, and the current prices fully reflect the Bank of England’s rate cut expectations, leaving no surprises for a sharp decline. BofA offers a more optimistic forecast: GBP/USD could surge to 1.45 by the end of 2026.

Citi is a representative of the “bearish” camp. The bank points out that the local elections in May could increase political uncertainty in the UK, and by the second half of 2026, the Bank of England might accelerate easing, putting strong downward pressure on the pound. Citi’s target price is 1.22 — a full 13% lower than Morgan Stanley’s end-of-year forecast of 1.36.

Where will the pound go in 2026?

The forecasts from the three giants range from 1.22 to 1.45, illustrating the market’s divided views on the pound’s outlook. For investors, the key is to closely monitor events that could trigger a turning point — such as the Bank of England’s interest rate decisions, the Federal Reserve’s policy shifts, and developments in UK domestic politics.

Regardless of the ultimate direction of the pound, the current level of 1.3562 already reflects many optimistic expectations. To seize opportunities in this wave of market movement, you need to stay alert and not be blinded by short-term gains.