A Drop Expected Before the Year-End Rally of GBP/USD

UBS analysts stated today that after the recent rally of the GBP/USD pair, a short-term decline is expected, but a rise to higher levels is anticipated by the end of the year. Analyst Patrick Ernst highlighted the stability in the UK bond market following earlier volatility that caused currency divergence. The current calm in the market has shifted focus to new risks, such as potential US tariffs, which could impact global risk perception and the pound.

Despite these concerns, European currencies have rallied recently due to announcements of European fiscal spending, helping the GBP approach the significant level of 1.30 against the USD. UBS indicates that the 1.30 level could be surpassed eventually, but a decline is likely in the near term due to tariff announcements expected in early April that may act as a catalyst for downward movement. The firm anticipates that GBP/USD may test the 1.26 level before rising to 1.31 by year-end.