GBP/USD: three reasons for a bullish outlook - Nomura

Analysts at Nomura explained that the medium-term outlook for sterling is bullish.

Key Quotes:

"There are three reasons why we hold a positive view on GBP: 1) the inflation premium in GBP looked overstretched; 2) the BOE will become less pessimistic owing to better global growth and 3) the difficulties of the early stages of Brexit look to be priced in already.

When it comes to Brexit, the BOE have assumed an orderly transition period, something we would tend to agree with and the market may continue to come to terms with (see What do ‘Hard’ and ‘Soft’ Brexit actually mean?). From here the next risk event will be the 8 June general election, which should result in a strong majority for the conservatives in the House of Commons.

Altogether we remain constructive on GBP and remain long via a basket of USD, EUR and AUD (see Six FX trades for summer 2017).We remove EUR/GBP upside from our 2017 forecasts and expect GBP/USD to test 1.37 by year-end."