By eFXdata — Jan 13 - 09:00 AM
Synopsis:
Goldman Sachs advises against further selling of GBP, citing potential for recovery in risk appetite, fiscal risk moderation, and delayed positive growth data as supportive factors.
Key Points:
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Risk Appetite Recovery:
- Recent GBP weakness is partly driven by broader risk-off sentiment in FX markets.
- A rebound in global risk appetite could provide support to GBP.
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Fiscal Risk Premium:
- Macro conditions and evolving net supply dynamics suggest eventual compression of fiscal risk premium in gilts.
- This should reduce perceived fiscal risks for the currency.
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Growth Data Lag:
- While UK growth momentum has recently softened, upcoming data reflecting increased government spending and investment could surprise positively.
- These improvements are not yet fully visible in the current market sentiment.
Conclusion:
Goldman Sachs recommends caution on further GBP downside in the near term, citing supportive factors that could stabilize or improve the currency's outlook.
Source:
Goldman Sachs Research/Market Commentary