JP Morgan Research maintains a bearish bias on GBP ahead of the UK local elections in May.

"UK political risk has been in focus for GBP, and the prominence of carry strategies will mean the sensitivity of GBP to the timeline for any Labour labour leadership contest will matter. The Mandelson vetting issue in focus this week is continuing to lay the groundwork for a potential Labour leadership challenge after the UK local elections," JPM notes.

"We have been bearish GBP despite the carry advantage in DM, given risks from energy importer status, politics and fiscal space vs. other G10 high yielders like AUD, NOK. We gauge scenario returns on potential PM candidates and see EUR/GBP ranging from above 0.89 on fiscal expansion compared to 0.85 on a UK political continuity outcome.

Short GBP/SEK: GBP/SEK is pro-carry, more beta neutral and can benefit from central bank and domestic data divergence, short GBP positioning, while offering Iran conflict asymmetry and cheap valuations vs fair value," JPM adds.