Amundi, the asset management giant, has become a bull from a bear on the British Pound thanks to its global outperformance against other currencies. Product structure-wise, it has been increasing its shareholding in the British Pound, which is expected to rise further after hitting a one-year high. The company's global forex chief, Andreas Koenig, predicts that the GBP/USD will hit a high of 1.35 by the end of the year, currently around 1.29.
According to Zhixin Finance, Amundi, which manages $2.3 trillion in assets, has become a bull from a bear on the British pound thanks to its global outperformance against other currencies. Its global forex chief, Andreas Koenig, predicts that the GBP/USD will hit a high of 1.35 by the end of the year, currently around 1.29.
Last year, Amundi bet against the pound, believing that it could fall to a low of 1.21 against the US dollar as the UK entered a recession. Now, Koenig says his long position is a "core conviction."
The stability of the British political situation contrasts sharply with the dramatic political twists and turns before the US presidential election and the ongoing political crisis in France. Since the beginning of this year, the GBP/USD has risen by nearly 1.5%, outperforming all other currencies in the G10, breaking through the 1.30 level last week. The GBP/EUR exchange rate is the highest since August 2022, at around 84 euro cents per pound, and Amundi predicts that the pound will further rise to 82 euro cents per pound.
Amundi has joined Wall Street's big banks, including Goldman Sachs, in betting on the pound. These banks expect the pound to rise due to the brighter prospects for the UK economy and the hope of political stability, following the victory of the Labour Party led by Keir Starmer. A view that the Bank of England's interest rate cut will be smaller than that of other central banks also provides support, making the pound for the best monthly performance since November last year.
Koenig said: "There are many reasons to support the pound, as the economic environment has improved and the government is relatively stable. This could be a less risky and diversified option in investment portfolios."
By contrast, JPMorgan warned that the strong rally in the pound could face a pullback as bullish bets hit historic highs. However, despite the short-term risks, JPMorgan remains firm in its prediction that the pound will continue its recent rally and hit $1.35 by March next year.
In Koenig's view, the amount of pound holdings may be too low as investors have reduced exposure to UK assets since Brexit. He said that any pullbacks would be opportunities to increase positions in the pound against the US dollar and the euro, especially as the Bank of England begins to cut interest rates. Traders are betting that the Bank of England may cut interest rates in September.
Koenig said, "The pullback after the start of the easing cycle may be a good buying opportunity. The GBP/USD exchange rate has already reached 1.30, but in the long run, it is still relatively low."