The British pound has spent the better part of a decade trying to claw back what Brexit took from it. Goldman Sachs thinks it may have clawed back too much.

In a client note from strategist Stuart Jenkins, the bank declared Sterling the most overvalued currency among the G10, a group that includes the US dollar, euro, Japanese yen, and seven other major currencies from developed economies. The core argument: the pound’s recovery from its post-Brexit collapse has now exceeded what the UK’s underlying economic fundamentals can justify.

The Brexit math still doesn’t add up

According to Goldman’s analysis, Brexit permanently dented Sterling’s fair value by approximately 6%.

Goldman’s proprietary GSDEER model, which stands for Goldman Sachs Dynamic Equilibrium Exchange Rate, had already flagged Sterling as the most structurally overvalued G10 currency back in January 2026. The latest note reinforces that earlier call and suggests the gap has only widened since.

Why Sterling ran so hot

A key factor behind the pound’s outperformance has been persistent inflation in the UK. Higher inflation tends to keep central banks hawkish, which means higher interest rates, which means foreign capital flows in to capture those yields. Investors chased UK bonds because the returns were juicier than what they could get in other developed markets. That demand for UK assets created demand for pounds, pushing the currency higher regardless of whether the broader economic picture supported it.

Jenkins and his team at Goldman project that this valuation discrepancy will generate increasing downward pressure on Sterling going forward. They didn’t provide specific price targets or timelines in this latest analysis, but the directional call is clear: the bank expects the pound to weaken.

What this means for investors

For traditional FX traders, the Goldman note is essentially a flashing yellow light on long Sterling positions. A weakening pound would have cascading effects across UK equities, gilt markets, and any asset denominated in Sterling. International investors holding UK assets face the risk of currency losses eroding their returns even if the underlying investments perform well.

The structural damage from Brexit, estimated at that 6% fair value hit, hasn’t been repaired by economic improvement. It’s been papered over by inflation-driven rate differentials that are unlikely to persist indefinitely.