• In our view, the surge in GBP/USD since the spring is related to expectations of stronger growthon the back of improving indicators and expectations the BOE will tighten monetary policy wellahead of their current guidance.
• After months with positive momentum in the UK economy, we believe it will be increasinglydifficult for future economic data to meet let alone surpass upbeat expectations.
• BOE market pricing is too hawkish and has to be revised as inflation look set to fall graduallytowards levels below the BOE inflation target, and as rising productivity growth will slowimprovements in unemployment.• Our long-term fair value estimate in GBP/USD is around 1.50-1.55.
• We recommend to sell GBP/USD at current level targeting the 1.52-1.54 level. We place the stopon this trade at 1.6280, which is above last week’s high as a break of that level would confirm weremain in a bullish trend.
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