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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 36 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 36 institutional desks. No promotion.
The desk views the outlook for the British pound as increasingly bearish against both the euro and the dollar, reflecting a consensus that is skewed to the downside. Per the full note from Goldman Sachs, the current economic indicators and market sentiment suggest a weakening of sterling, particularly as the Bank of England's (BoE) policy decisions come under scrutiny. The desk notes that the recent inflation data and growth forecasts have not provided sufficient support for a bullish stance on the pound. As such, we anticipate further downward pressure on GBP/USD and GBP/EUR in the near term.
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.
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.
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.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Sterling faces headwinds from weak growth and sticky inflation, potentially limiting upside. EUR/GBP may test the 0.90 level if the bearish view materializes, while GBP/USD could slip below 1.20.
Risks to this view
Upside risks include a faster-than-expected BoE pivot to hawkishness, improved UK growth data, or a global risk-on shift. Downside risks include further deterioration in the UK economy or a stronger dollar on Fed hawkishness.
How we cover this story
Live cross-firm bank consensus across 36 desks — FX, oil & gold
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