Pound's Summer Rally Faces Autumn Fiscal Shock

The British Pound has enjoyed a summer recovery against the US Dollar, gaining 1.75% in July and briefly returning above 1.35 before easing to around 1.3436.

Bank of America remains constructive on the Pound over the medium term but warns that fiscal uncertainty and pressure on long-dated Gilts could unsettle Sterling heading into autumn.

The Bank of England is showing no urgency to move rates, while investors are increasingly looking beyond monetary policy towards the government's fiscal arithmetic.

BofA expects rates to remain unchanged through 2026 but says the risk is still tilted towards a later increase if energy prices stay high and second-round inflation effects emerge.