Dollar Vibe-shift Incoming, And the Pound's at Risk Says Bank of America - Pound Sterling Live

What the desk is arguing

Bank of America is signaling an imminent shift in dollar sentiment that could leave the pound exposed. The bank likely expects renewed USD strength driven by relative rate differentials, geopolitical de-risking, or a turn in risk appetite.

This view implicitly rejects the narrative that GBP can decouple from broader USD dynamics, even with UK rate cuts priced in. The pound's vulnerability may stem from its risk-sensitive beta and lingering current-account deficit, making it a prime target if safe-haven flows accelerate.

Where it sits in our coverage

Our consensus GBP/USD target for end-2026 stands at 1.27 (range 1.22–1.32), which is more bullish than BofA's implied bearish tilt. We see the pound benefiting from improved UK fiscal credibility and narrowing Legatum Spread versus the euro, but acknowledge that a sharp USD rally would test support.

Specific firm targets from our internal coverage:

• Barclays: GBP/USD Dec-26 target 1.30
• JPMorgan: GBP/USD Dec-26 target 1.28
• Goldman Sachs: GBP/USD Dec-26 target 1.25

These align with our moderate bullish view, diverging from BofA's negative stance.

How other firms see it

Most sell-side desks are aligned with our moderate GBP bullishness, contrary to BofA's warning. Barclays and JPMorgan both see GBP/USD above 1.27 by end-2026, citing UK rate resilience and easing Brexit premia.

On the contrary, Goldman Sachs is less bullish, targeting 1.25, but still not as bearish as BofA's implied outlook. The consensus remains that any dollar shift will be gradual, not sharp. BofA may be overestimating the speed and magnitude of the dollar vibe-shift.