We're Exiting Our GBP/USD Short: Bank of America - Pound Sterling Live

What the desk is arguing

Bank of America's exit from its short position in GBP/USD reflects a confidence that the pound may appreciate against the dollar. This aligns with a broader sentiment from several analysts who expect the GBP to gain ground, bolstered by economic recovery signals and rising interest rate expectations.

The market seems to be reassessing the trajectory of UK monetary policy compared to the US, with expectations for potential rate cuts by the Federal Reserve. These dynamics could favor the pound, as evidenced by a consensus target for GBP/USD reaching around 1.36 by year-end, indicating a bullish outlook from various institutions.

Where it sits in our coverage

Currently, GBP/USD is trading at 1.3100, with our consensus target for March 2026 set at 1.3500, reflecting a range from 1.3200 to 1.3800. This marks a significant divergence from Bank of America's recent forecasts, which estimate a slightly lower target of 1.3400 for March 2026 and 1.3700 for June 2026.

Several other banks have more bullish leanings for December 2026, including: - JPMorgan: 1.3600 - Goldman: 1.3600 - Morgan Stanley: 1.4700

How other firms see it

Amidst this shift, other banks maintain varied perspectives on the GBP's outlook. For example, Citi holds a more bearish view with a December 2026 target of 1.2400, reflecting a possible divergence in expectations around the UK's economic recovery compared to the U.S.

Conversely, firms such as Morgan Stanley and Deutsche Bank are aligned with a more optimistic view. Both have set targets of 1.4700 and 1.4200 respectively for December 2026.