Nomura maintains a long EUR/GBP position in its FX recommendation portfolio.

"We raise the conviction level on this trade, as we see increasing political challenges in the weeks ahead. The latest revelations over the appointment of former US Ambassador Peter Mandelson have put PM Keir Starmer under even more pressure ahead of the local elections on 7 May, when the Labour party is likely to suffer sizable losses based on recent polling. If Starmer is ousted, a new leader in unlikely to be seen as being as market friendly as the current PM, which could bring fiscal sustainability risks into focus, especially with the recent rise in inflation and back-end interest rates are also weighing on debt sustainability calculations," Nomura notes.

"Cyclically, we see recent ECB and BoE comments as differing somewhat, and while a hike on 30 April remains unlikely from either central bank, the ECB seems much closer to pulling the trigger than the BOE...We continue to see a move towards 0.90 in the months ahead," Nomura adds.