Goldman calls sterling the most overvalued G10 currency. The BoE has more cuts coming than the market thinks.

The pound's post-Brexit recovery has, according to Goldman Sachs, now overshot the fundamentals that justified it. Goldman's GSDEER model labels sterling the most structurally overvalued G10 currency, a harder verdict than the bank has issued for years, and its FX team is recommending a long EUR/GBP position as the explicit trade. The mechanism is straightforward: Goldman projects three 25bp Bank of England cuts by end-2026, more than markets currently price, which narrows sterling's yield advantage against the euro just as UK fiscal consolidation bites into domestic growth. For context, Goldman's earlier fair-value estimate for GBP sits around $1.25, well below pre-Brexit levels of $1.45, and the bank sees the currency as extended even in a weakening-dollar environment. UK importers and any business carrying dollar-denominated costs should revisit their hedging book before the BoE delivers the first cut the market has not fully priced.