Goldman Sachs Pound To Euro And Dollar Forecast: Sterling Outlook Skewed To The Downside - Exchange Rates Org UK

What the desk is arguing

Goldman Sachs argues that the outlook for sterling is skewed to the downside, with little room for a near-term rebound. The bank's forecast suggests that the pound will struggle against both the euro and the dollar as macroeconomic headwinds persist.

Supporting this view, Goldman points to the UK's deteriorating growth outlook and sticky inflation, which limits the Bank of England's ability to provide hawkish surprises. Additionally, the bank sees fading momentum from earlier positive Brexit-related narratives.

The desk implicitly rejects the optimistic view that sterling is undervalued and due for a mean-reversion rally. Instead, it argues that the current environment of high interest rates and global risk aversion will continue to weigh on the pound.

Where it sits in our coverage

Our internal consensus has been more neutral on sterling, with a EUR/GBP target near 0.87 and GBP/USD at 1.26. Goldman's downside skew is a contrarian call within our coverage, as most banks see a more balanced outlook.

Among firms with explicit targets, Barclays forecasts GBP/USD at 1.30 by year-end, JPMorgan at 1.25, and Bank of America at 1.22. Goldman's bearish stance places it below the pack, aligning more closely with Morgan Stanley at 1.20.

How other firms see it

Barclays disagrees, seeing a recovery in GBP as UK inflation cools faster than the US, allowing the pound to appreciate. JPMorgan is also more constructive, arguing that the worst of the UK macro shock is behind us.

Contrarily, Morgan Stanley aligns with Goldman's negative view, citing similar concerns over UK growth and BoE policy. Bank of America warns of downside risks but doesn't go as far as Goldman in skew.