Synopsis:

Goldman Sachs maintains a constructive view on GBP/USD, citing UK resilience to US trade shocks and European FX strength. However, they advise caution on Sterling relative to other European currencies due to lingering domestic risks.

Key Points:

• GBP/USD Outlook Positive:
  Sterling continues to benefit from broad EUR FX strength and its lower vulnerability to US tariffs, keeping the upside case for Cable (GBP/USD) intact.

• Domestic Risks Persist:
  Goldman flags the risk of renewed fiscal premium concerns in the UK, especially if fiscal headroom tightens. Additionally, a dovish BoE pivot could emerge, though it may partially ease those fiscal concerns.

• Sterling vs. European FX:
  Despite the broader bullish bias on GBP, Goldman does not see a strong case for GBP outperformance vs. EUR, CHF, or SEK, given domestic uncertainties.

• Substitutive Risk Factors:
  A dovish BoE and fiscal risks are seen as interlinked—with one likely tempering the impact of the other—making sustained outperformance of GBP more difficult relative to peers.

Conclusion:

Goldman Sachs remains bullish on GBP/USD in the broader European FX context, but sees limited upside for GBP vs. other European currencies near term due to the UK’s fiscal and monetary policy ambiguity.