Investing.com – The pound sterling has lost its status as the only currency to outperform the US dollar year-to-date, but Bank of America believes there will be a constructive case for the British currency in 2025.

BoA Securities says sterling has been on an almost uninterrupted upward trend since the sterling crisis in September 2022, helped this year by the removal of political uncertainty and favorable market conditions.

“Despite Trump 2.0, conditions for continued GBP outperformance remain our base case, reinforced by our expectations that the UK is unlikely to be a focal point for a future US administration,” BoA added.

The Bank noted that several questions remain regarding the medium-term sustainability of UK public finances following the adoption of the UK Budget and in the context of widening deficits and high emissions.

However, it would be wrong to assume that markets chose the UK because of a particular discipline. Our GBP-specific risk premium framework finds no evidence for this. There is a lack of UK-specific risk premium measures, including stable CDS and our favorite measure, the GBP volume premium.

“As a result, while sterling has rebounded from its highs in recent weeks, we do not see this as the start of a fresh phase of significant cuts. The constructive narrative we have presented remains valid. Trump 2.0 increases uncertainty, but the UK is not unique here,” BoA said.

“The GBP secular rally remains intact, supported by short-term fiscal stimulus. Trade uncertainty has increased, but we believe the UK is better prepared to weather this storm than many of its European counterparts.”