Goldman Sachs has upgraded its GBP forecasts across major currency pairs, citing better-than-expected UK growth, fiscal discipline, and limited direct exposure to US tariffs. Sterling has also benefited from political stability, a stronger services sector, and supportive rate differentials. With risks skewed in the UK’s favor compared to the Eurozone and signs of renewed investor appetite for GBP assets, Goldman now expects higher GBP/USD and lower EUR/GBP through the remainder of 2025 and into 2026.
Key Points:
1️⃣ Forecast Revisions: GBP Upgraded Across the Board ?
GBP/USD
Old Forecasts: 1.25 (3M), 1.28 (6M), 1.30 (12M)
New Forecasts: 1.28 (3M), 1.32 (6M), 1.35 (12M)
EUR/GBP
Old Forecasts: 0.86 (3M), 0.85 (6M), 0.84 (12M)
New Forecasts: 0.84 (3M), 0.83 (6M), 0.82 (12M)
2️⃣ Domestic Data and Political Factors Support GBP ?
UK services and labor markets are outperforming expectations.
Government messaging on deficit-neutral defense spending has helped restore investor confidence.
3️⃣ Tariff Exposure Lower Than Eurozone ⚖️
UK is less exposed to looming US tariffs, reducing downside risks relative to EUR.
Tariff-driven risk-off flows are less likely to hurt GBP than EUR.
4️⃣ Rate Differential Still Attractive ?
BoE expected to cut rates more cautiously than the ECB, supporting UK front-end rates and attracting inflows.
Conclusion:
Goldman Sachs now expects stronger GBP performance across both USD and EUR pairs, driven by UK macro resilience, limited tariff exposure, and constructive investor sentiment. With GBP/USD revised up to 1.35 and EUR/GBP expected to slide to 0.82 by 12 months, the bank sees sterling as well-positioned for further gains, especially relative to the Euro.
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