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The British pound is a favoured currency in Invesco’s 2025 mid-year investment outlook.
The asset manager points to sterling’s relative stability and policy backdrop amid rising global uncertainty.
Invesco highlights sterling alongside the euro as preferred currencies in an environment where uncertainty around U.S. economic policy and tariff disputes is prompting a global reset in asset allocation.
"We favour major developed currencies such as the euro and British pound sterling," the report states, noting that the weakening U.S. dollar, driven by falling growth forecasts and geopolitical friction, is accelerating diversification among reserve managers and investors alike.
Invesco is one of the world’s largest independent investment management firms, managing over $1.6 trillion in assets (as of 2024). Its research is closely watched by institutional investors, pension funds, sovereign wealth funds, and financial advisors, many of whom use its insights to shape asset allocation decisions.
Unlike the U.S., where policy volatility, historically high tariffs, and elevated fiscal deficits are raising investor concerns, the UK offers attractive valuation and income characteristics. Invesco points to high and stable dividend yields in UK equities and a strong weighting towards financials, a sector likely to benefit from a steeper yield curve as mortgage lending improves.
Moreover, the Bank of England is seen as better positioned for future easing compared to the U.S. Federal Reserve, which remains in “wait-and-see” mode amid mixed economic data. Faster policy loosening by central banks outside the U.S., including the European Central Bank and potentially the BoE, is expected to support economic activity and reinforce confidence in their respective currencies.
The UK economy, while not immune to global trade tensions, is perceived as relatively insulated compared to major exporters.
Pound Sterling’s appeal is further underpinned by broader capital flows moving away from the dollar. "Foreign investors have begun reconsidering their U.S. exposures," Invesco noted, citing a growing trend among central banks to reduce reliance on the dollar through increased gold reserves and greater diversification.
Invesco’s base-case scenario sees the pound benefiting from ongoing U.S. economic uncertainty, global disinflationary pressures, and improved UK domestic demand.
The Dollar's trend of weakness is meanwhile expected to continue.
"Foreign investors have been recycling surpluses into USD assets for well over a decade. That trend may be starting to reverse. 2025 growth forecasts are falling more quickly in the US than in the rest of the world, and we expect further USD weakness in the second half of this year," says Invesco.