Synopsis:

Credit Agricole sees GBP as oversold and undervalued ahead of key UK economic data and BoE speeches this week. December GDP figures will be crucial for assessing whether the UK economy returned to growth, while UK gilt yields and sovereign CDS spreads could also influence GBP sentiment.

Key Points:

1. Key UK Data & Events to Watch This Week:

   • December GDP Data → Investors will look for signs that the UK economy resumed growth at the end of 2024.
   • BoE Speeches (Bailey, Mann, Greene) → These could provide insight into monetary policy outlook and whether the BoE remains cautious on rate cuts.

2. GBP is Undervalued and Oversold:

   • The pound has been under pressure recently, but remains fundamentally undervalued.
   • Without significant data disappointments or a renewed rise in UK sovereign credit risks, GBP could consolidate near recent lows rather than weaken further.

3. Watch UK Gilt Yields & Sovereign CDS Spreads:

   • Movements in UK bond yields and credit default swaps (CDS) could drive GBP sentiment, especially if investor concerns over UK fiscal sustainability return.

Conclusion:

GBP remains oversold and undervalued, and this week’s UK GDP data and BoE commentary could help determine whether the currency stabilizes or weakens further. As long as UK sovereign credit risks stay contained, GBP has room to hold near recent lows or even recover slightly.