Reports published by JPMorgan and BNP Paribas late last month offered differing assessments of sterling’s prospects in the second quarter of 2021.
The former suggested GBP’s resilience was wearing thin as the worsening Covid-19 situation in Europe threatened economic spillover – and that the prospect of another Scottish independence referendum was a reminder that the economic and political fallout from Brexit was far from over.
The JPMorgan analysts warned the market was in danger of assuming away the long-term drags to UK growth from what was a narrow trade deal with the European Union.
In contrast, BNP Paribas’s second-quarter global outlook referred to scope for further appreciation, describing UK equities as cheap and suggesting the market had more room to price in central bank policy tightening than anywhere else in the G10.
“In addition, aside from global issues around vaccine efficacy, idiosyncratic risks do not pose a significant threat to GBP in the near term in our view,” says Parisha Saimbi, G10 FX sterling strategist at BNP Paribas Markets 360.
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