GBP/USD Surge: Pound Strengthens to 3-Year Highs

The British pound (GBP) has capitalized on dollar weakness, with GBP/USD climbing above 1.35—its highest level in three years. UBS sees further upside potential, targeting 1.38 and recommending buying dips toward 1.3390.

Key Drivers for Pound Strength
✅ Risk-on sentiment: Global market optimism supports high-beta currencies like the pound.
✅ UK-US trade deal advantage: The UK remains the only country with a bilateral trade agreement with the US, boosting GBP appeal.
✅ Bank of England policy: While UBS expects quarterly rate cuts, the Pound still benefits from relative stability compared to USD.

Outlook: Will GBP/USD Reach 1.38?
UBS maintains a bullish stance on GBP/USD, citing:

Continued dollar vulnerability due to fiscal risks.

Structural support for the Pound from trade and monetary policy dynamics.

Potential pullbacks to 1.3390 as buying opportunities before a push toward 1.38.

Final Thoughts
With the US dollar struggling amid fiscal uncertainty and the Pound holding strong, GBP/USD could extend gains toward 1.38 in the coming months. Traders should watch for:

US debt ceiling and budget debates – Further political risks could weaken USD.

Bank of England rate decisions – Faster cuts could limit GBP upside.

Global risk sentiment – A shift to risk-off trading may temporarily boost the dollar.

For now, the path of least resistance favors the Pound, keeping the 1.38 target in play.