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Jun 10 - 10:55 AM

Credit Agricole: Cautious Outlook for GBP Ahead of UK GDP Data

By eFXdata  —  Jun 10 - 09:30 AM

Synopsis:

Credit Agricole provides a cautious outlook for the British pound (GBP) this week, emphasizing the potential impact of upcoming UK GDP data for April. Investors are keen to determine whether the economic rebound observed in Q1 has continued into Q2. The analysis also highlights the vulnerability of the GBP to economic disappointments and broader market sentiment ahead of the June FOMC meeting.

Key Points:

  1. UK GDP Data Focus:

    • Investors are eagerly awaiting the UK GDP data for April to assess if the economic momentum from Q1 has persisted into Q2.
    • The performance of the GDP data will be critical in determining the near-term direction of the GBP.
  2. GBP Valuation:

    • The GBP is currently perceived as slightly overvalued against the USD and particularly against the EUR.
    • This overvaluation makes the GBP more susceptible to any economic disappointments.
  3. Market Sentiment and Risk Factors:

    • Market caution is expected ahead of the June FOMC meeting, which could negatively impact risk sentiment.
    • As a risk-correlated currency, the GBP could be particularly vulnerable against the high-yielding, safe-haven USD during periods of market uncertainty.

Conclusion:

Credit Agricole advises caution for GBP investors in the near term, highlighting the importance of the upcoming UK GDP data for April. With the GBP already appearing overvalued against the USD and EUR, any negative economic surprises could weigh heavily on the currency. Additionally, the anticipated market caution ahead of the June FOMC meeting could further impact the GBP, particularly against the USD, due to its risk-correlated nature.

Source:
Crédit Agricole Research/Market Commentary

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