The GBP was heavily influenced by Theresa May’s announcement of a British snap election in June. The aim of the election is to strengthen May’s hand ahead of the “Brexit” negotiation, but the latest polls show that her party’s advantage over the Labour opposition is shrinking.
The market could be disappointed if there is no much change in UK’s position regarding a softer “Brexit” deal, which is likely to happen.
Despite longer term valuation models like the purchasing power parity (PPP) suggest that the British pound is currently undervalued by some 700 pips, Sterling could depreciate even further in the aftermath of the UK snap election.
We are expecting the Pound to move lower towards 1.25 area.