Bank of America turns neutral on sterling, expects intensive news from new PM
Strategists have softened their "more-than-consensus bullish view" on sterling, expecting the currency's recent gains to fall back as political uncertainty remains elevated. Strategists led by Kamal Sharma said in a report that their view on the pound has turned neutral in the short term after the pound's "sharp and rapid gains" this month. Sterling has gained more than 1% against the euro this month; it fell 0.3% on Tuesday to about 0.85, close to Bank of America's year-end target of 0.84. With a new government in place, the market will seek a new balance. "For this reason, and EUR/GBP falling below 0.85, we are neutral on GBP," Sharma wrote. "Although this is the summer market, the news is likely to continue over the coming weeks." Sharma's team, which has been bullish on the pound since early 2026, now expects "sterling to undergo a period of consolidation before the next leg lower". They added that their view remains more positive than consensus for the year-end and 2027/28. Sharma added that the bar for a rate hike in July is very high.