Amundi expects the GBP/USD exchange rate to reach 1.35, even though JPMorgan is skeptical about the British currency.

• Political stability in the UK and better economic growth make the pound less risky.
• A global currency expert expects the pound to reach $1.35 by the end of the year.

Amundi SA has moved from being pessimistic to optimistic about the pound due to recent positive trends. However, JPMorgan Chase & Co. warns there might be too many investors betting on the pound right now.

Amundi, Europe’s largest asset manager with $2.3 trillion in assets, has recently taken a positive stance on the pound and expects further gains, as the pound reached a one-year high. Andreas König, the company’s global currency expert, aims for the pound to reach $1.35 by the end of the year, up from around $1.29 now.

Amundi is joining other banks like Goldman Sachs in showing growing interest in the pound, driven by improved economic prospects for the UK and hopes for political stability after the Labour Party’s win under Prime Minister Keir Starmer. The expectation that the Bank of England will cut interest rates less than other central banks is also supporting the pound, potentially leading to its best performance since November.

König believes that with economic improvement and a relatively stable government, there are strong reasons to be positive about the pound. He views it as a less risky investment and a good option for diversifying a portfolio.

The pound has risen nearly 1.5% since the beginning of the year, outperforming other major currencies against the dollar and surpassing $1.30 last week.

Against the euro, the pound is at its strongest level since August 2022, valued at around 84 pence, with Amundi expecting it to rise further to 82 pence.

Last year, Amundi bet against the pound, expecting it to fall to $1.21 due to a potential recession. Now, König says their positive stance on the pound is a strong belief.

The widespread optimism about UK assets has led to record high bullish bets on the pound, which JPMorgan sees as a short-term risk. Despite this, JPMorgan maintains its forecast that the pound will continue to rise and reach $1.35 by March next year.

König thinks the pound might be undervalued because investors reduced their exposure to UK assets after Brexit. He views any decline as a chance to increase investments in the pound, especially as the Bank of England might start cutting interest rates soon, possibly in September.

König suggests that a market correction due to the start of the easing cycle might be a good buying opportunity. Although the pound is at $1.30 now, long-term charts show it is still relatively low.