The Pound to Dollar (GBP/USD) exchange rate has posted 11-month highs just below 1.30 before consolidating around 1.2965.
Goldman Sachs had previously targeted GBP/USD gains to 1.30 and has now extended its target to 1.31.
Goldman considers that financial conditions will be benign in the short term with increased optimism over a soft landing in the US economy and lower inflation helping to underpin equities.
This combination will limit support for the US dollar and provide a favourable backdrop for the Pound in global markets.
Goldman notes the probability of Bank of England (BoE) interest rates, but considers that the wider fundamental environment will be the key driver for the Pound.
The bank is also positive on the Pound crosses over the medium term. The bank considers that the UK currency is more attractive than the Australian and Canadian dollars given that the former is dependent on firm China sentiment while wider US dollar weakness will have a negative impact on the Canadian currency.
Goldman does expect the dollar will find renewed strength into the November US presidential election. Although the bank is positive on the Pound, it is therefore wary over holding long GBP/USD positions beyond the summer.
