British Pound Forecast: Why UniCredit Sees a “Wind of Change” Supporting GBP/USD

UniCredit says the pound could continue its recent recovery against the US dollar as UK political developments improve confidence in fiscal policy. Expectations that Andy Burnham will appoint a fiscally conservative Chancellor, possibly Shabana Mahmood, have eased concerns about borrowing and supported gilts, with the 10-year UK yield falling below 4.92% after nearing 5.20% in May. GBP/USD was trading around 1.3450 after rising more than 1.7% in July and briefly moving back above 1.35. UniCredit sees scope for the pair to extend toward 1.37 if the improved sentiment persists, helped by possible Bank of England rate hike expectations later this year. The bank cautions, however, that it is still unclear whether this is a durable shift or a temporary reaction to political headlines.