Bank of America predicts sterling to soar to $1.43 by 2025

In the United Kingdom, the British pound has struggled to recover since the 2016 EU referendum which resulted in its significant decline. As of April 2025, Bank of America, led by economist Athanasios Vamvakidis, predicts that the pound will regain its strength, targeting a value of $1.43 by the end of 2025 and even reaching $1.54 in 2026. Furthermore, the pound has seen a 7% increase against the dollar in 2025, a result of the dollar's weakening amidst concerns regarding U.S. trade policies. The analysis suggests that U.S. tariffs might foster closer economic relations between the U.K. and the EU, benefiting sterling’s recovery. The analysis also considers several factors contributing to the pound's expected rise, such as the U.K.'s services-oriented economy, which offers some insulation from U.S. tariffs, and predictions for interest rate cuts from the Bank of England. With the U.K. economy estimated to grow by 1.1% this year and 1.3% by 2026, compared to 0.8% growth in the EU, analysts project that sterling will not only gain against the dollar but also appreciate against the euro, which is expected to decline in value relative to sterling. Other investment banks such as Deutsche Bank and Goldman Sachs share a similar optimistic outlook on the pound's appreciation. Deutsche Bank anticipates the pound reaching $1.37 by the end of 2025 and $1.43 in 2026, while Goldman Sachs takes a cautious yet optimistic stance on the currency’s potential strength. Despite the uncertainty in U.S. trade policies, the overall sentiment suggests that the U.K. is less susceptible to shocks compared to its EU counterparts, further enhancing forecasts for the British pound. Analysts caution that a complete pivot in U.S. trade policies across various sectors could alter these predictions significantly. Bank of America emphasizes that this shift is unlikely to occur, thereby supporting their bullish case for sterling's growth. The long-term recovery of the pound signifies not only the ongoing maturation of the U.K. economy post-Brexit but also reflects a global economic landscape responding strategically to trade relations where the U.K. seeks to innovate and strengthen its ties with international partners.