Goldman Sachs: Pound Sterling Risks "Significant" Falls on Bank of England Decision - Pound Sterling Live

What the desk is arguing

Goldman Sachs warns that the Pound Sterling could face "significant" falls depending on the outcome of the Bank of England's upcoming policy decision. The firm posits that any signals towards more dovish monetary policy could drive GBP lower, especially in the current climate of economic uncertainty and inflationary pressures.

Supporting this view, Goldman cites prevailing concerns over the UK economy's resilience alongside the potential for further monetary easing. If the BoE indicates a softer stance, this could exacerbate current bearish sentiments and lead to increased selling pressure on the Pound. The implicit counterfactual here is the effectiveness of a more hawkish tilt, which, if introduced, might offer some temporary support against this bearish outlook.

Where it sits in our coverage

Our consensus target for GBP/USD currently sits at 1.075 with a firm spread between 1.04 and 1.12. This outlook aligns with Goldman’s analysis as both highlight risks of downward movement, especially in light of anticipated dovish signals from the BoE.

Specific firms have divergent views, with JPMorgan targeting 1.10 and Barclays setting a slightly more optimistic position at 1.08. Meanwhile, BofA believes the pair could dip to 1.04:

• JPMorgan: 1.10 (Mar26)
• Barclays: 1.08 (Dec26)
• BofA: 1.04 (Mar26)

How other firms see it

Among the banks assessing the GBP outlook, there appears to be a mix of sentiment. Firms like JPMorgan and Barclays align with Goldman's caution, both setting higher targets than our consensus, suggesting a less severe outlook compared to Goldman's warning of significant falls.

Conversely, BofA adopts a more bearish position, reinforcing fears articulated by Goldman regarding potential declines in GBP. Thus, we see a varied perspective across firms, with a tendency towards cautious bearishness prevailing among those acknowledging the risks outlined by Goldman.