Bank of America Global Research discusses GBP outlook and maintains a constructive bias into year-end.
"Our bias remains for further cyclical outperformance through the rest of 2022, supported by the following factors: the positive cyclical & growth tailwinds; the global liquidity glut; a broadly lower FX vol environment; and the hawkish pivot by the Bank of England. Though we expect broad-based appreciation, GBP gains are likely to be concentrated amongst the low beta currencies such as CHF and JPY," BofA notes.
"Long GBP was high on the list of many investors’ calls for rest of the year. With this has come the risk that GBP is one of the more crowded positions in G10 FX. Q2 may have eased some of those concerns, however, as GBP has effectively traded a range and GBP options skew/vol does not suggest that investors are positioning for a meaningful reversal in fortune in H2. Both momentum and positioning indicators have eased away from their respective overbought signals which we think should allow GBP to track higher through the coming quarters," BofA adds.