Goldman Sachs Research maintains a bearish and short tactical GBP/USD position targeting a move towards 1.3250.

"Spending announcements in the first week of the Burnham government have been relatively minor in scale. But question marks around their planned funding sources-alongside the prospect of larger spending initiatives ahead-have recentred investor focus on the risks and constraints on the UK fiscal front. We see this renewed scrutiny as having helped Sterling unwind part of its July outperformance last week, alongside a drag from resurgent energy prices and the associated risk-off impulse," GS notes.

"Part of Sterling's July divergence from cyclical fundamentals has retraced as a result, but we see risks as skewed to a near-term extension of this past week's themes and price action, and maintain our tactical short GBP/USD recommendation," GS adds.