Pound-Dollar looks cheap on long-run valuation measures, but QCAM says weak UK fundamentals still argue against chasing Sterling much higher.
The Pound Sterling to Dollar exchange rate (GBP/USD) pushed back towards 1.35 on Friday, but foreign exchange analysts at QCAM Currency Asset Management see an awkward split between valuation and fundamentals.
GBP/USD traded around 1.3499, having gained 1.75% in July and recovered sharply from late-July levels below 1.33.
On purchasing-power-parity measures, QCAM says the Pound is around 12% undervalued, with GBP/USD fair value estimated near 1.53 and a neutral range of roughly 1.37–1.70.
That sounds bullish. QCAM is not convinced it is enough.
“We see no quick recovery in GBP fundamentals, especially versus the USD,” the firm said.
“The economy has been resilient, but we believe that UK fundamentals remain challenged thanks to BREXIT.”
QCAM points in particular to the UK’s external position.
“The twin deficits and a negative net international investment position are structural handicaps for the GBP,” it said.
Interest rates offer little obvious escape route either. UK rates remain slightly above US rates, but QCAM does not expect the Bank of England to tighten materially more than the Federal Reserve.
“Inflation remains a challenge, but we do not see the BoE tighten policy more than the Fed, if at all.”
That leaves QCAM’s discretionary macro position neutral despite the apparent cheapness of Sterling.
GBP/USD Outlook: Sentiment Has Turned More Positive
There are, however, reasons not to turn outright bearish.
QCAM says sentiment has improved since Andy Burnham became Prime Minister, while its business-survey and technical signals have both turned in Sterling’s favour.
“Business Sentiment and Technical both went long GBP, shifting the overall strategy position to 45% long GBP,” it said.
Speculative positioning is another potential source of support. QCAM describes the net GBP position as short and “close to past reversal points”, leaving scope for a squeeze if risk appetite improves.
That is one reason the firm is reluctant to short Sterling even though it dislikes the macro backdrop.
“We are reluctant to go short as the GBP is likely to rally quickly if global risk sentiment improves.”
The tension is fairly clear. At 1.35, GBP/USD remains well below QCAM’s PPP estimate, surveys and technicals have improved, and positioning could help on the upside.
But the structural story – deficits, external financing needs and limited rate support – remains much less flattering.
For now, QCAM keeps the macro call neutral: Sterling looks cheap, but not obviously mispriced enough to ignore the reasons why it is cheap.
Pound Sterling Prices: This Week
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.36% | -0.30% | -1.77% | -0.55% | -0.58% | -0.32% | +0.18% | |
| EUR | +0.36% | +0.06% | -1.41% | -0.19% | -0.22% | +0.04% | +0.54% | |
| GBP | +0.30% | -0.06% | -1.48% | -0.25% | -0.28% | -0.02% | +0.48% | |
| JPY | +1.80% | +1.43% | +1.50% | +1.24% | +1.21% | +1.47% | +1.98% | |
| CAD | +0.55% | +0.19% | +0.25% | -1.23% | -0.03% | +0.23% | +0.73% | |
| AUD | +0.58% | +0.22% | +0.29% | -1.19% | +0.03% | +0.26% | +0.77% | |
| NZD | +0.32% | -0.04% | +0.02% | -1.45% | -0.23% | -0.26% | +0.50% | |
| CHF | -0.18% | -0.54% | -0.48% | -1.95% | -0.73% | -0.76% | -0.50% |
The FX heat map compares how Pound Sterling (GBP) has performed against a basket of major currencies over the past week. The largest move was against the Japanese Yen, where Pound Sterling recorded its sharpest decline. Data comparing prices today (07/08/2026 16:46 UTC) and daily close on 31/07/2026.
To read the table, choose the base currency from the left-hand column and then move across to the quote currency along the top row. For example, the GBP row and USD column shows the weekly percentage move in GBP/USD.
