Goldman Sachs Research adopts a bearish bias on GBP in the near-term.

"UK political newsflow has picked up following local elections and, as is often the case, a rise in political uncertainty has been accompanied by FX underperformance. n this context, it is worth noting that prediction market pricing of a leadership transition by year-end has already been elevated for some time, so we attribute the recent underperformance mostly to a narrowing in the timeline, as well as the confluence of realising this political pressure with macro factors that are already challenging the UK fiscal outlook at this point," GS notes.

"Our economists note that the macro repercussions of the energy shock have already driven a further erosion of fiscal headroom, and energy futures have continued to move higher for the rest of the year. This presents a more durable risk to Sterling, and can also amplify the pass-through from political uncertainty relative to last year. It is also less clear to us that recent sources of Sterling resilience, namely a sharp rebound in global risk sentiment and larger-than-usual cross-border M&A inflows, can remain as supportive as they have been over the past few weeks," GS adds.