The Pound Sterling (GBP) has positioned itself as one of the top two performers among major currencies so far this year. Analysts at Commerzbank delve into the outlook for the GBP.
The Pound should be treated with caution
The duration of the Pound’s current strength remains uncertain. Presently, it appears to be a somewhat fragile phenomenon, unlike the robust USD strength observed last summer, which was sustained by prolonged periods of strong data and a hawkish stance from the Fed. Rather, the Pound’s strength resembles a delicate plant that could wilt in the face of adversity.
Today’s data is expected to reinforce the recent narrative, with the unemployment rate ideally not surging and wage growth maintaining its pace. Only under these conditions would the Bank of England be inclined to focus on potential future rate cuts, thereby justifying further strength in the Pound. However, until such signs materialize, exercising caution with regard to the GBP seems prudent.
