Investing.com -- Wealth management firm UBS Group AG (NYSE:UBS) has revised its forecast for the GBP/USD currency pair, citing the its recent gain and broader dollar weakness sparked by the U.S. administration’s Liberation Day announcements.
In its Chief Investment Office’s investment views note on Thursday, the firm stated that it now expects the pair to rise to 1.39 by the end of March 2026.
While the British Pound (GBP) has not yet become a new safe-haven currency, UBS noted that it has gained attractiveness due to its liquidity and potential for carry trade.
On Friday, GBP/USD fell 0.3% against the dollar reaching 1.33.
The GBP’s strength was also influenced by the absence of the U.K. on U.S. President Donald Trump’s additional tariffs list, which subjected the U.K. only to a 10% universal rate rather than specific punitive tariffs.
The U.K.’s diplomatic response to the tariffs has been noted, with no major retaliatory measures planned, although a trade agreement could be possible in the future.
Despite this positive development, UBS cautions that the U.K.’s trade-dependent economy is vulnerable in a global recession scenario, which could negatively affect the GBP.
Although not considered a safe-haven currency, the GBP, along with the Euro, exhibited some safe-haven characteristics during recent dollar weakness.
UBS acknowledges the high correlation between the GBP and Euro amid these uncertain times and considers the GBP’s liquidity and carry profile attractive to investors.
The Bank of England’s hawkish stance within the G10, with expectations of quarterly 25 basis point cuts, is anticipated to support the GBP’s position.
UBS has adjusted its investment forecast for GBP/USD, suggesting the currency pair could edge higher over the forecast horizon.
The firm has identified a new support level at 1.30, which was previously resistance, and a new resistance level just above 1.34.
However, the ongoing tariff saga and shifts in global risk sentiment are considered downside risks for GBPUSD.
Moreover, domestic issues in the U.S., such as debates surrounding institutions like the Federal Reserve, could prompt a more pronounced rally in the GBP.