Bank of America Merrill Lynch FX Strategy Research discuss GBP outlook and thinks that going into early 2018, there are asymmetric risks from Brexit news for sterling.
“In our view, the risks to GBP are asymmetric. We continue to believe that the bar to further GBP gains from Brexit news is larger than the downside risks to the pound from bad news.
Markets had the opportunity to sell sterling through Q4 as talks went to the wire for a conclusion of Phase 1 but the “transition put” has stood firm.
Furthermore, with the global economy experiencing a synchronised upswing in growth, we think GBP remains undervalued relative to its traditional cyclical drivers – a point we flagged at the start of 2017. Transition remains the key for certainty, in our view,” BofAML argues.