Bank of America Global Research discusses GBP outlook, and notes that GBP continues to benefit from strong flow support and has been resilient to collapse in UK data surprises.
"It all looked so good for GBP at the start of the year as performance through 1H reflected a series of positive surprises (culminating in a hawkish pivot by the BoE) and the pricing out of the Brexit risk premium. 2H has been more of a struggle, yet despite this, GBP remains only one of two currencies that have eked out positive gains versus USD since the start of the year and GBP TWI remains within touching distance of the recent highs," BofA notes.
"The start of 2H could therefore be characterized as the moment at which reality and expectations collide. This is probably a necessary process that is needed before GBP can finally recalibrate to its cyclical indicators which still remain supportive," BofA adds.