Bank of America (NYSE:BAC) (BofA) reiterated its positive outlook for the British Pound against the Swiss Franc (GBP/CHF), projecting a rise towards 1.20 by mid-2025. The firm's forecast remains unchanged, emphasizing a bullish stance on the currency pair over the next two years.
The optimism from BofA comes despite imminent UK Consumer Price Index (CPI) data and the currency pair nearing the upper strike of the ratio call spread, a type of options strategy used in trading. BofA's stance is influenced by several factors that are expected to support the GBP's strength against the CHF.
According to BofA, policy divergence and a secular bullishness for the GBP, alongside the relative insulation of the UK's service sector economy from potential global trade challenges, are key elements backing the positive forecast. The UK's service sector is a significant part of its economy and is seen as less vulnerable to international trade disruptions.
Moreover, BofA suggests that the UK's fiscal policy, which is anticipated to be less restrictive, could serve as a buffer against economic shocks. This fiscal approach is expected to contribute to the GBP's resilience and potential appreciation against the CHF.
In conclusion, BofA's analysis indicates that a combination of supportive economic policies and the UK's strong service sector will likely propel the GBP/CHF exchange rate higher by mid-2025.
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