Credit Agricole CIB Research discusses GBP outlook, and notes that its quant models keep pointing that the currency is undervalued and oversold.
"The GBP remains an attractive stagflation and risk aversion hedge and the most recent developments in the UK have seemingly added to the headwinds for the currency. To start with, the Queen's Speech, which laid out on Tuesday the government's legislative proposals for the upcoming parliamentary year, left investors worrying that the economy could sink into a recession in the coming quarters in the absence of meaningful fiscal support. In addition, recent media reports have suggested that PM Boris Johnson would announce on Friday that his government would introduce new legislation that allows its ministers to override parts of the Northern Ireland protocol," CACIB notes.
"That being said, with many negatives in the price, we think that the currency is looking quite oversold and undervalued at present as highlighted by our latest FX positioning and FAST FX model updates," CACIB ads.