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BofA Recommend Buying GBP/USD Calls on Seasonality, Fed/BoE Timelines

GBP
  • Bank of America recommend buying 25d 3m GBP/USD calls (1.3074 strike, spot ref 1.2800). They see GBP receiving cyclical support across April, with a rise in minimum wages and positive seasonality to work in GBP/USD’s favour, while USD undergoes gradual depreciation as the Fed cuts rates ahead of the BoE – they remain comfortable with their view that the BoE will cut rates in August at the earliest.
  • On seasonality, BofA see corporate repatriation of FX earnings to pay GBP dividends to dominate through the month of April – and given that a large proportion of UK listed companies are USD functional, they would expect GBP/USD to be the main beneficiary of such flows.
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