Economists at Barclays see limited scope for the pound to rally in the near-term and targets GBP/USD around 1.33 by year-end.

Rising inflation into Q1 22 to undercut real rate support for the pound

“Rising UK inflation is undercutting the positive impact of Bank of England rate hike expectations. The front-end of the UK OIS curve now looks reasonably priced to us. However, rising inflation into Q1 22 should undercut real rate support for the pound." 

"Slowing growth and ongoing concerns about the EU-UK post-Brexit trading relationships will limit the ability for GBP to rally near-term. Further out, elevated levels of foreign acquisition and investment in UK assets should provide an undercurrent of support for GBP."

“We expect the GBP/USD to hover around the 1.33 level by end-2021.”