A client note from BNPP from our friends at eFX News
BNP Paribas FX Strategy Research notes that as GBP short exposure has squeezed to neutral levels for the first time since 2015.
However, BNPP argues that GBP should still extend its gains if the Bank of England's inflation report on Thursday is on the hawkish side.
"UK PMIs surprised to the upside this week and, while growth has softened in Q1, it has not fallen by as much as most expected immediately after Brexit. Moreover, inflation has risen sooner and by more than expected," BNPP adds.
Therefore, BNPP argues that GBP could spike higher as there is an increasing risk that the BoE will be forced to unwind the rate cut delivered last summer.
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