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(Bloomberg) -- The pound is set to face growing pressure as its recovery from the post-Brexit selloff has made it the most overvalued currency among major peers, according to Goldman Sachs Group Inc.

Sterling has overshot its fundamentals, “with Brexit likely having weighed on the currency’s fair value on the order of 6%,” Stuart Jenkins, a strategist in London, wrote in a note to clients. After a strong recovery in real terms, “sterling is the most overvalued G10 currency.”

The pound has risen about 1.5% against the dollar since Britain formally left the European Union in 2020, but remains roughly 10% below its pre-Brexit referendum level. With much of that discount now erased, some analysts see less room for further gains.

The currency is set to face a tougher environment in the months ahead. A relatively dovish Bank of England compared with the European Central Bank and Federal Reserve could weigh on the currency, while political uncertainty is adding to volatility. Traders are waiting for the results of the Makerfield by-election due early Friday that may trigger a bid to oust UK Premier Keir Starmer.

Jenkins acknowledged that sterling’s valuation looks less demanding over longer time horizons. The currency is broadly in line with historical norms on a 30-year real trade-weighted basis, a measure that reduces the impact of Brexit. Forming closer trade ties with the EU may also offset the “challenging current valuation picture,” he added.

Still, Goldman’s valuation metrics “point to some degree of over-valuation, which we think constitutes a meaningful medium-term headwind for the currency,” Jenkins wrote.