⚖️🇬🇧🇨🇭Rate Differentials Make GBP Attractive vs Franc: Cable FX Macro

• Sterling has met offers over the course of last month, it extended losses vs the euro, the dollar, and the franc this week. However, the pound continues to lead the G10 this year, and stands as the only currency to post gains vs the dollar, up 2.0% YTD

• Our Cable FX Macro G10FX Model Composite has held long GBP trades for a number of months in 2024 as momentum, carry, and volatility factors support sterling upside

• From a rate differential perspective, the pound is starting to look cheap vs the franc. The 2yr spread above 380bps could see GBP trading closer to 1.1450 vs CHF, it currently ticks at 1.1250

• Risks to this outlook are safe haven demand on geopolitical risks and a strong period of franc trading starting November. Also, if the BoE eventually catches down with the rest of DM central banks, this would pressure the pound. However, yesterday's MPC comments came to balance Bailey's dovishness