Synopsis:

Credit Agricole highlights that the British pound (GBP) is well-positioned to benefit from stronger-than-expected UK economic data and improving global risk sentiment in the wake of the US-China trade truce.

Key Points:

• Resilient Performance:
  The GBP has outperformed many G10 peers recently, supported by stronger-than-expected Q1 UK GDP data.

• Growth Drivers:

  • Quarterly GDP growth was fueled by business investment, net exports, and gross fixed capital formation (GFCF).

  • This outweighed declines in government spending and private consumption.

  • March’s monthly GDP also posted gains led by the services and construction sectors.

• Global Tailwinds:

  • The US-China trade truce has improved global risk sentiment.

  • Lower FX volatility is likely to support carry trades, making higher-yielding currencies like GBP more attractive.

• Relative Appeal:
  GBP stands to benefit from its positive rate differential and improving growth outlook, in contrast to low-yielding funding currencies like the CHF and JPY.

Conclusion:

With solid domestic growth momentum and a favorable global backdrop, Credit Agricole sees this as a moment for GBP strength. The currency is likely to remain a preferred choice for investors seeking carry and growth exposure.