Sterling has had a tough month, but Bank of America (BofA) believes the negative view on the currency has been overstated and remains bullish on the pound by taking a lower EUR/GBP position.
GBP/USD fell 0.1% to $1.3277, down 2.8% on the month, while EUR/GBP fell 0.2% to £0.8690 but up 0.7% over the same period.
“Over the past month, the pound has seemed stuck in a bearish cycle with no matter what the data or market sentiment, the pound remains seen as an asset to sell,” BofA Securities analysts said in a note dated August 5.
BofA also noted that some of the UK’s economic achievements were sidelined by the negative narrative dominated by social media, which also weakened sentiment towards the pound and UK bonds (Gilts).
While acknowledging that UK economic policy has not been delivered brilliantly, BofA rejects the view of some that the UK economy is in turmoil.
The bank therefore remains bullish on the pound until the end of the year and maintains a lower EUR/GBP position, as the UK emerges from tariff pressure in better shape than the eurozone. BofA also believes that the market price in the Bank of England’s policy is more realistic than expectations for the ECB, which is still expected to cut interest rates.
As elsewhere, UK data for the first and second quarters is heavily influenced by upcoming tariff announcements. However, this has not stopped a few skeptics from continuing to specifically criticize the pound.
