Britain’s pound is set to resume gains versus the euro as economic fundamentals trump political uncertainty, according to Nomura Holdings Inc.
Sterling will climb from almost a three-month low as the Bank of England moves closer to raising interest rates, analysts led by London-based Yujiro Goto wrote in a report Thursday. Nomura recommended buying three-month options to bypass any short-term fluctuations prompted by the outcome of Thursday’s national election.
“Once political events pass, the market will likely refocus on the U.K.’s relatively strong economic performance,” Goto wrote.
The pound has fallen more than 5 percent from a high in March as anxiety that the tight national vote won’t yield a clear winner muddied signs of improvement in the nation’s economy. While traders see the central bank increasing borrowing costs in the middle of 2016, Nomura predicted liftoff in February.
Nomura favors buying a euro-sterling three-month put spread that expires Aug. 7.