Morgan Stanley Closes Bullish Pound Call as Budget Gains to Fade

Morgan Stanley Changes Pound Outlook

Morgan Stanley has ended its previously optimistic stance on the British pound, closing its bullish recommendation on the currency. According to the bank, sterling has likely already exhausted its main positive drivers in the near term and is unlikely to gain much further momentum soon.

Budget boost seen as temporary

Strategists at Morgan Stanley, including David Adams, note that there may still be room for a short-lived rally in the pound following the latest UK budget announcement. However, they expect any such strength to be fleeting, with post-budget gains likely to fade rather than develop into a sustained upward trend.

Weaker appeal of GBP/USD

The bank also highlights that the appeal of the pound against the US dollar has diminished in recent weeks. One factor is that the correlation between the pound-dollar pair and equity markets has dropped to around zero, reducing the supportive link from risk assets that previously helped sterling.

Lack of local positive drivers

Morgan Stanley’s note points to a scarcity of fresh, domestic catalysts that could push the pound significantly higher from here. With few supportive local factors visible on the horizon, the strategists see limited justification for maintaining a bullish position in the currency.

“The currency is likely to have seen its last near-term positive catalyst.”

Author’s summary: Morgan Stanley has shut its bullish bet on the pound, arguing that post-budget support is fading and, with no strong local drivers left, sterling’s near-term upside now looks largely capped.

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Bloomberg Bloomberg — 2025-11-27

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