Goldman Sachs has recently revised its forecasts for the British pound, upgrading its outlook against major currencies. This change reflects stronger-than-anticipated growth within the UK, strict fiscal management, and minimal direct exposure to US tariffs. The pound has also gained from a politically stable environment, a robust services sector, and favorable interest rate differentials. Given the UK’s advantageous position compared to the Eurozone, along with growing investor interest in GBP assets, Goldman anticipates a rise in GBP/USD and a drop in EUR/GBP as we move through 2025 into 2026.
Here’s what you need to know:
1️⃣ Forecast Adjustments: Strengthened Projections for GBP
- GBP/USD: Initially predicted at 1.25 for the next 3 months, 1.28 for 6 months, and 1.30 by 12 months has now been revised to 1.28, 1.32, and 1.35, respectively.
- EUR/GBP: Previous forecasts were 0.86 at 3 months, 0.85 at 6 months, and 0.84 at 12 months. These have been adjusted to 0.84, 0.83, and 0.82, respectively.
2️⃣ Supporting Domestic Data and Political Landscape
- The pound is benefiting from strong domestic financial indicators and political stability that foster confidence.
3️⃣ Reduced Tariff Risks
- The UK’s lesser exposure to US tariffs means it faces fewer downside risks compared to the Eurozone. This positions GBP to fare better in a landscape driven by tariff concerns.
4️⃣ Attractive Interest Rate Differences
- The pound continues to be attractive due to favorable interest rate differentials, adding to its appeal for investors.
In Summary: Goldman Sachs sees a brighter future for the pound against both the US dollar and the euro, buoyed by the UK’s economic resilience, limited tariff exposure, and growing investor optimism. With GBP/USD expected to climb to 1.35 and EUR/GBP predicted to dip to 0.82 over the year, the British pound seems poised for notable gains, particularly in comparison to the euro.
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