(Bloomberg) -- Bank of America Corp. has emerged as Wall Street’s biggest pound bull, pushing a 2025 forecast that sees the currency hitting its highest level against the euro since 2016 and surging 8% versus the dollar.
The US bank is calling for the pound to advance to 80 pence per euro, the strongest since around the Brexit vote in 2016, and $1.38 by the end of 2025. That’s due to stronger growth in the UK compared to the euro area as well as Britain’s fiscal stimulus and relatively high interest rates.
The pound has been the top-performing G-10 currency bar the greenback this year. Its strength stems from the UK’s post-election political stability relative to the recent turmoil in the euro area’s main economies, along with expectations for the Bank of England to take a slower pace on interest-rate cuts compared to the European Central Bank.
“The momentum is still there” for the pound to strengthen, Athanasios Vamvakidis, BofA’s global head of G-10 FX strategy, said in a briefing.
Vamvakidis added that the threat of US tariffs under President-elect Donald Trump’s incoming administration may push the UK to bolster trade relations with Europe, which could lift domestic growth.
The US bank sees the BOE delivering a total of 100 basis points in rate cuts next year, slightly more than market pricing for 77 basis points. But that’s still less than the almost 150 basis points of easing expected from the ECB, according to swaps.
BofA’s pound forecasts are among the most bullish in a Bloomberg poll, which sees the currency at $1.28 and 82 pence per euro by the end of 2025. Early on Friday, it traded at $1.27 and 83 pence per euro, poised for its best yearly advance against the common currency since 2021.