GBP is "down but not out"
The background to GS' views are the recent sharp weakness in the pound:
investor concerns about UK debt market dynamics, with bond sell-offs driving yields higher and raising government borrowing costsbroader concerns about the UK's growth fundamentals and ineffective policies to boost economic growth and tax revenuerecent GBP weakness partly reflects a broader risk-off sentiment in FX markets, which may reverse as risk appetite recoversfiscal risks in UK Gilts could compress, reducing pressure on the poundupcoming hard data on increased government spending and investment might surprise positively, bolstering sentiment
Risk to the view include:
a hawkish Federal Reserve, combined with strong U.S. inflation and labor data, creates a challenging environment for GBP/USD ... difficult for the Pound with higher global yields, as well as to Dollar strength more directlypotential "escalation in the loop of sell-offs in UK assets and a more strenuous fiscal position"the Euro may face challenges from potential tariffs under Trump
Cable up
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