GBPUSD: Strategy Views from Credit Agricole

In 2024, the GBP could benefit from the convergence between (1) the still-weak UK economic outlook and (2) the Eurozone – in particular the US economy. In addition, the UK economy could benefit if the opposition Labour Party comes back to power after the general election later this year to pursue a policy of ‘gradual rapprochement’ with the EU and thus dismantle Brexit trade barriers. To the extent that this helps boost domestic investment and spending, it could support the UK economic outlook and thus the appeal of GBP-denominated assets. All that being
said, we believe that the GBP would struggle to extend its more recent gains given that it is still trading at a rate disadvantage vs the rest of G10 and given the still-poor quality of the UK economic data.