British Pound: Can Resilience Continue With the Bar Set Higher? – OCBC

British Pound (GBP) resilience is expected to persist into early 2027, according to OCBC strategists Sim Moh Siong and Christopher Wong, with fiscal discipline, higher UK growth forecasts and greater political stability providing support. Revised EUR/GBP projections point to sustained GBP strength against the Euro (EUR). However, markets have already priced in aggressive Bank of England (BoE) tightening, suggesting the easier gains are largely over and further appreciation will hinge on increasingly positive surprises in UK data.

Can Sterling Extend Gains as the Bar for Further Upside Rises?

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"GBP has held up better than expected despite the fiscal strain from higher energy and borrowing costs. Crucially, the Budget did not add to those concerns. The government kept within its fiscal rules and retained a GBP15bn buffer against the stability rule, despite absorbing higher debt interest costs linked to the Middle East conflict."

"The broader UK backdrop also remains relatively supportive. Growth has proved resilient, with the OBR upgrading its 2026 growth forecast to 1.2%. Greater political stability and continued fiscal discipline should provide some relative support for GBP, while closer UK-EU economic ties could offer an additional medium-term tailwind."

"We revise our EUR/GBP forecast to reflect continued GBP resilience against EUR into early 2027, although the easier sterling gains may now be behind us. With markets already pricing an aggressive BoE tightening cycle, much of the rates support is already in the price. The bar for the next leg higher in GBP is therefore getting increasingly high."

"GBP resilience should extend into early 2027 as fiscal discipline, resilient growth and political stability remain supportive. But with substantial BoE tightening already priced, further gains will require increasingly positive UK surprises."

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