BofA turns neutral on GBP after rally toward target

Bank of America has shifted to a neutral short-term view on the British pound after GBP rallied sharply and moved close to the bank’s year-end targets. BofA notes that GBP has been the best-performing currency over the past month, supported by positive carry, stronger-than-expected macro data, and political developments, even though positioning remains structurally bearish. EUR/GBP has already broken below 0.85, nearing BofA’s 0.84 year-end target, while GBP/USD looks less stretched after the recent dollar rebound. The bank still sees sterling as modestly rich rather than materially overvalued, estimating fair value near 1.33 versus spot around 1.35. The takeaway for markets is that sterling may pause after its rapid gains, with volatility expected to ease through summer before picking up around the US midterms and UK budget event in November.