Investing.com – Bank of America shifted to a neutral near-term stance on the British pound on July 17, 2026, after the currency reached levels close to the firm’s year-end forecast following a sharp rally over the past month.
The bank has maintained a bullish view on GBP since the start of the year and broke below 0.85 this week, moving further toward BofA’s year-end target of 0.84.
The pound has been the best performing currency over the past month, driven by positive carry, positive macro data surprises and recent political developments. GBP appreciation occurred despite structural bearishness toward the currency, with IMM positioning still showing sizeable shorts.
The firm remains more constructive than consensus into the end of the year and into 2027/28, but noted the move has been sharp and rapid. For EUR/GBP, BofA expects a period of consolidation before the next leg lower. For GBP/USD, the recent dollar rally leaves the pair less exposed to momentum extremes.
BofA recommended selling 2-month at-the-money straddles versus buying 6-month out-of-the-money-forward strangles for zero cost as a proxy for forward volatility on June 25, 2026. The firm expects volatility to grind lower through the summer, with a meaningful pickup likely around the US midterms and UK budget event in November.
A 500-day rolling framework incorporating UK-US yield spreads, FX volatility, GBP risk premium and a broad USD factor generates a fair value of roughly 1.33 versus spot at 1.35. Sterling appears modestly rich by around 1-2%, rather than substantially overvalued, according to the bank’s analysis.
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