MUFG Research discusses GBP outlook and maintains a neutral bias with a bearish tilt in the near-term.
"The pound’s failure to derive support from the recent improvement in risk sentiment and higher UK yields could reflect that growth concerns remain a heavy weight on the pound. Even more restrictive BoE policy rates would act to deepen the economic downturn in the UK. At the same time, even if the BoE does deliver higher rates they are still expected to remain well below inflation and deeply negative in real terms," MUFG notes.
"The lack of follow through to a stronger pound from the improvement in risk sentiment and higher UK yields has disappointed Leveraged Funds who have been building up long pound positions over the past month," MUFG adds.