GBP Strengthens as Recession Forecasts Fade and Relations with EU Improve 🇬🇧
SocGen reports that the recession forecasts for the UK have been revised, and relations with the EU have improved, both contributing to the strengthening of the Pound Sterling. Furthermore, the large speculative Sterling short positions built up during 2022's political chaos have now been significantly reduced. Interest rate differentials have also been moving more favourably for the pound.
GBP/USD Longs Look More Attractive Amid Temporary Overshoot 🎯
SocGen sees potential for a temporary overshoot, particularly in EUR/GBP, as the market builds a long GBP position and reduces an outsized EUR long. As a result, GBP/USD longs are looking more attractive than the currently popular EUR/USD ones. However, caution is advised, as while SocGen's 2023 GDP forecast isn’t for recession, a mere 0.3% GDP growth is hardly reason for over-excitement.