Bank of America Global Research discusses GBP outlook and adopts a structural bearish bias over the medium-term.
"It has been another chastening month for GBP as weakness becomes broader based. At the start of September, we argued that the outlook was likely to remain challenging through a month where seasonality historically works against GBP. There is no doubt that the ongoing strength in USD and the fragile geopolitical backdrop have been contributing factors weighing on G10 FX more broadly," BofA notes.
"However, and as today's BoE rate decision highlighted once more, we believe that GBP is going through a significant metamorphosis as investors view GBP through a different lens than other G10 currencies. Cyclical considerations such as the terminal rate and quantum of rate hikes are giving way to structural concerns around the UK's deteriorating fiscal and balance of payments situation.
These factors will not easily fade away and we think risk premium in GBP is becoming increasingly embedded. The Great GBP reset is well underway," BofA adds.