Trust is easy to lose but hard to regain. The pound managed to do just that, despite the conflict in the Middle East and yet another political upheaval. Let’s discuss these topics and develop a trading plan for the GBP/USD pair.
The article covers the following subjects:
Major Takeaways
- The pound is emerging as one of the leaders in the Forex market.
- Politics and geopolitics have not weakened the pound.
- Investors have confidence in the Bank of England.
- Long trades on the GBP/USD pair can be considered with targets of 1.355 and 1.364.
Weekly Fundamental Forecast for Pound Sterling
The pound has come a long way from the “Great British Peso” to a safe-haven currency since Brexit and political upheavals. In 2026, the pound has finally regained investor confidence. It was the second-best performer among G10 currencies after the Australian dollar in the second quarter and the fourth-best since the start of the year. Notably, these stunning results were achieved amid yet another political storm!
After Brexit and a plunge to a historic low following Liz Truss’s in 2022, the pound became a high-risk currency. It was compared with emerging-market currencies and jokingly referred to as the “Great British Peso.” Gradually, the pound became involved in carry trades as a high-yield asset, a dynamic that continues to support the GBP/USD pair to this day.
GBP/USD Risk Reversals
Source: Bloomberg.
It would seem that the conflict in the Middle East—which is devastating for the British economy—and yet another change in the prime minister’s office should have sent the pound plummeting. In fact, it turned out to be an island of stability in an ocean of political storms. GBP/USD bulls were encouraged by the fact that the soon-to-be-appointed new head of government, Andy Burnham, has no intention of making drastic changes. He will adhere to the existing fiscal rules. Stability has returned to the pound, turning it into a reliable currency and increasing the risk of an upward reversal.
The slowdown in inflation in Britain has instilled confidence among investors that the Bank of England will tackle it more quickly and effectively than the Fed or the ECB. This is causing the UK yield curve to steepen faster than in the US or Germany, providing support for GBP/USD quotes.
Yield Curve in UK, UK, and Germany
Source: Bloomberg.
Add to this the widespread interest of international investors in UK companies, and the outlook for GBPUSD becomes even more optimistic. While mergers and acquisitions do not affect the exchange rate, capital inflows allow the UK to finance its current account deficit. This has a positive impact on the pound.
Thus, the stabilization of the political situation, investor confidence in the Bank of England’s ability to curb inflation, strong demand for British companies from non-residents, and the effective use of the pound in carry trades are allowing the bulls to gain the upper hand amid doubts about the Fed’s aggressive monetary tightening and the revival of TACO trading. If the conflict in the Middle East does not escalate further, the pound will continue its advance.
Weekly Trading Plan for GBP/USD
Weak US employment data created an opportunity to add to long positions formed at 1.3200 on the GBP/USD pair. The initial upside targets are 1.3550 and 1.3640. The recommendation is to buy.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of GBPUSD in real time mode
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Source: Original Article
