The pound was a surprisingly-strong performer in 2024 but I think there will be a catch-down trade in 2025.
The strength last year was driven by a more-hawkish central bank but the stick inflation last year wasn't due to a stronger economy (like the US) but structural factors. Now the growth outlook is deteriorating and the central bank continues to hold off on rate cuts.
Meanwhile, the new Labour government is off to a rough start with approval ratings for Starmer low and some real pessimism setting in.
The most-important voter for markets is fixed income and gilts are in a bad spot. With the 11 bps rise today, US 10-year yields are at the highest since 2008.
The fear is that Labour will reach to more revenue-raising avenues to improve the budget, creating more headwinds.
As for the pound, it's at the lowest since April with today's 132 pip decline and just 40 pips from the April low.
