Bank of America Global Research flags a scope for AI-linked inflows to support GBP over the medium-term.

":Whilst investors have remained focus on the UK's fragile public finances, the second part of the "dual deficit" narrative, the balance of payments, has been largely overlooked. Admittedly, whilst global balance of payments data has been impacted by several shocks over the past decade, the UK's issues date back to Brexit amid question marks over the attractiveness of the UK as an FDI destination," BofA notes.

"Yet, as the AI revolution is still seen as a US phenomenon, the UK has emerged as an attractive destination for AI-linked inflows on top of well-established financial services and biotech influx from overseas. Whilst this may not immediately translate into a healthier BoP position, it perhaps provides a reason why GBP has been resilient against the backdrop of ongoing political uncertainty. Further out, a higher productivity/capital intensive mix of FDI inflows should be seen as a medium-term positive for GBP valuation trends," BofA adds.