Pound-to-Dollar Forecast Upgraded at Goldman Sachs: Reeves Selloff Done


Image: HM Treasury.


Pound Sterling will "reset" higher says leading investment bank.

Goldman Sachs has upgraded its forecasts for the Pound to Dollar exchange rate (GBP/USD) and addressed the consequences of last week's mini-selloff.

At the halfway point of the year, the investment bank's projections show a material uplift for the GBP/USD path relative to what was expected at the start of 2025 and the start of the second quarter.

"Our view is of substantial GBP/USD upside from here," says a recent note from Goldman Sachs.

The new predictions are available as part of our exclusive download, which can be accessed here.

Addressing the issue of the UK's financial outlook, analysts acknowledge "lingering fiscal concerns" and "the latest concessions to welfare cuts may imply a more complicated path ahead for UK growth from further tax hikes."

Last week UK Prime Minister Keir Starmer abandoned his atempts to cut the welfare budget owing to unexpected resistance from his own party. Instead, he ended up actually raising the cost of the bill.

However, it was the sight of Chancellor Rachel Reeves, who is in charge of the country's budget and finances, crying in the House of Commons that triggered a sudden 'event' for the Pound and UK bonds, which sold off in tandem.

The selloff was reminiscent of the market reaction to Liz Truss' mini-budget.

However, Goldman Sachs says "the currency can continue to reverse some of Wednesday’s sell-off, offering a more attractive entry point for those considering diversified short Dollar expressions via tactical GBP/USD longs."

"We think the risks to the currency from a larger fiscal repricing remain more contained for now. Ultimately, we think the currency can gradually reset stronger," it adds.


Above: GBP/USD in 2025.


The key driver for Pound-Dollar will, however, remain what happens on the Dollar side of the equation.

Goldman Sachs sees three main factors behind its bearish Dollar outlook"

1) "The maelstrom of U.S. policymaking" is expected to slow U.S. activity and prompt investors to reconsider whether they should remain overallocated to U.S. assets.

2) Stimulus in Germany and China is proving to be "stronger than we anticipated," says Goldman Sachs. This is offering investors non-USD alternatives.

3) "The design and broad application of tariffs make it likely that U.S. businesses and consumers will bear the brunt of tariff increases"

To see the latest GBP/USD point forecasts from Goldman Sachs, request our exclusive download here.


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