File image of U.S. President Donald Trump. Official White House Photo by Abe McNatt.
GBP/USD predicted to surpass 1.60 and GBP/EUR 1.30.
Significant gains for the British Pound are possible in this new era of U.S. Dollar devaluation, argues a new research note from QuantMetriks Advisory, the London-based boutique specialising in applied macro and microeconomic research.
According to Dr. Savvas Savouri, Managing Director of QuantMetriks, the Trump administration is reviving past Republican tactics that will yield repeat outcomes: namely, tariff threats that trigger a devaluation of the U.S. Dollar.
Drawing parallels with Reagan (1985), Bush Jr. (2005), and Nixon (1971), Savouri says the current environment is ripe for another engineered dollar slide, as the next instalment of this Republican "blockbuster" franchise plays out.
Savouri leads a team that leverages a proprietary economic modelling system, drawing on deep sectoral data across major economies.
He has amassed over three decades of experience across both the sell-side and buy-side, with roles at notable institutions including Hoare Govett Securities, Credit Lyonnais Securities, Commerzbank Securities, Lazard, and Toscafund Asset Management, where he served as Chief Economist.
Savouri has long been bullish on the Pound, and concedes that he has been calling the "pound up for a long time. Well, this is not so much my last time as the right time."
(Readers might also be interested in our latest Q3 GBP/EUR and EUR/GBP consensus forecast data, which is now out; click here to request and see the mean and median forecasts at the world's leading investment banks).
The tectonic plates of FX are moving as Trump pursues a weaker Dollar to bolster U.S. exports and lower imports, thereby rebalancing U.S. trade dynamics out of deficit.
Stephen Miran, Chairman of the Council of Economic Advisers in Trump's White House, has spelt out the agenda:
"The desire to reform the global trading system and put American industry on fairer ground vis-à-vis the rest of the world has been a consistent theme for President Trump for decades.
"The root of the economic imbalances lies in persistent dollar overvaluation that prevents the balancing of international trade."
To achieve a weaker Dollar, Trump will pursue the playbook used by his predecessors, namely the threat of significant tariffs on trade partners.
On previous occassions, "the real & present threat of tariffs saw 11-hour agreements to allay them... Japan & then China each in their respective times, agreed to devalue the Dollar," explains Savouri.
The implications for the Pound are significant: Savouri states unequivocally that if history repeats and the dollar weakens as expected, then "it's a certainty the pound will rally against the dollar."
"Yes, having languished for so long, the pound will rise against the dollar... the pound will also rise relative to the euro," he says.
Gains against the Euro are also likely as the eurozone is described as facing deepening structural weakness, exacerbated by a rising euro (relative to USD and JPY).
Savouri says the deterioration in domestic fundamentals would likely force the European Central Bank (ECB) into aggressive monetary easing, possibly even renewed quantitative easing.
In contrast, the Bank of England will struggle to justify market expectations of further rate cuts because UK real economic indicators are described as "relatively OK," while inflation is still sticky at around 3%.
In fact, the QuantMetriks forecast for Bank Rate over the 2025-2029 period is 4.00 to 5.00%.
Savouri expects any upward move in the Pound to be sharp and self-reinforcing, noting:
"When the pound does begin to move higher... it will do so as steeply as when it has behaved that way in the past."
QuantMetriks forecasts the Pound to Dollar exchange rate to rise to 1.60–1.70 in the 2025-2029 horizon, from a current level of 1.35.
The Pound to Euro exchange rate is expected to rise to 1.30–1.40 during this period.