Pound Sterling Rebound Hidden Risks: Goldman Sachs Reveals Long-Term Depreciation Pressure

**Exchange Rate Short-Term Rise, but Long-Term Risks Intensify**

In early December, the GBP/USD( exchange rate showed a strong performance over the past month, surging to 1.3350, with a daily increase of 1.08%. Simultaneously, the EUR/GBP) declined to 0.8737, hitting a recent low. Behind this rebound, market expectations of Federal Reserve rate cuts have become the main driver—weak November ADP data and signals from the Trump administration regarding Fed personnel have dampened the dollar's strength.

On the other hand, after the UK budget bill was finalized, investor concerns about UK debt prospects temporarily eased, creating demand for a rebound in the pound. Ebury strategists commented, "Eliminating budget uncertainties could create room for the pound to rally before the end of the year." The OECD( also raised the UK's 2026 economic growth forecast to 1.2%, with a 2027 growth estimate of 1.3%, further boosting market sentiment.

**Central Bank Easing Cycle Approaching, Downward Rate Risks Emerge**

The OECD forecast predicts that the Bank of England will implement two more rate cuts before June next year, lowering the benchmark rate to 3.5%, signaling the end of the easing cycle. UK Chancellor Rishi Sunak welcomed this, claiming that UK economic growth will exceed expectations.

However, this optimistic outlook conceals deeper concerns. German commercial banks warn that UK spending will rise sharply over the next two years, necessitating austerity measures afterward. The institution pointed out, "The UK budget dilemma will become a long-term drag, with related negative signals likely to continue emerging. Without clear solutions, the pound will remain under pressure."

**Goldman Sachs Warns: Fiscal Tightening Coupled with Easing Will Keep the Pound Under Long-Term Pressure**

Goldman Sachs' investment strategy team notes that fiscal constraints remain the main challenge for the pound among G-10 currencies, especially compared to other European currencies. Additionally, risks in the UK labor market are intensifying, exerting further downward pressure on rates.

"The combination of fiscal austerity and monetary easing will pose a long-term drag on the pound," said Goldman Sachs analysts. This view is reflected in their revised exchange rate forecasts—raising the EUR/GBP) target: expecting 0.89 in three months, 0.90 in six months, and 0.92 after one year.

**Emerging Markets Perspective: The Impact of GBP Depreciation on Global Exchange Rate Patterns**

Against the backdrop of prolonged pressure on the pound, global currency patterns are also adjusting. Emerging market currencies, such as the Philippine peso, are gaining respite during the dollar's weakening cycle. When traditional strong currencies like the pound face policy-driven depreciation pressures, corresponding exchange rate fluctuations will reshape investors' cross-border allocation strategies.

Overall, the short-term rebound of the pound is merely a temporary balance between policy and data factors; long-term fiscal and monetary policy contradictions still exist. Investors should remain cautious of potential pullbacks from this rally, especially regarding the long-term outlook for the pound's exchange rate.