The Pound to Dollar exchange rate traded near 1.35, while GBP/EUR remained close to its strongest levels of 2026.
Latest exchange rates at the market close:
- GBP/USD: 1.345377 (–0.17%).
- EUR/USD: 1.143775 (–0.06%).
- USD/JPY: 162.4012 (+0.01%).
Lloyds Says Sterling’s Recovery Has Solid Foundations
According to Lloyds, the Pound’s recent strength has been driven by more than takeover-related capital flows into UK companies.
“Sterling’s recent outperformance has developed some legs.”
The bank believes markets have welcomed the political transition to Andy Burnham, hoping that his popularity and economic advisers can deliver a more credible long-term growth strategy.
At the same time, the UK economy has proved more resilient and less inflationary in response to the Iran-related energy shock than many analysts expected. GDP growth has been stronger, consumer spending has improved and the labour market has shown signs of stabilisation.
Lloyds also notes that elevated household savings and relatively low private-sector leverage leave the UK better positioned than many European economies to absorb higher energy costs.
Lloyds Favours the Pound Against the Euro
Lloyds sees scope for further Sterling gains against the Euro over the summer but remains more cautious about the Pound’s outlook against the US Dollar.
The bank argues that the Eurozone economy has been more exposed to the consequences of the Iran conflict, creating room for further GBP/EUR gains. EUR/GBP could therefore retreat towards the lower end of its longer-term trading range.
However, Lloyds believes that sustained outperformance against the Dollar will be considerably more difficult.
“It is harder to see a sustained outperformance of GBP versus the US Dollar.”
The bank points to stronger US economic growth, continued investment linked to artificial intelligence and a Federal Reserve that remains more hawkish than the Bank of England.
Autumn Budget Creates a Risk for Sterling
Lloyds warns that the Pound’s political tailwinds may prove temporary, as the new government will face difficult fiscal decisions in the autumn Budget.
Conclusion: resilient UK economic data could support further Pound gains against the Euro during the summer, particularly if the Eurozone remains under pressure from higher energy costs. However, GBP/USD upside may be limited by stronger US growth and a more hawkish Federal Reserve, while the UK autumn Budget could become the main risk for Sterling and British assets.
