Citibank: Political risks and rate cuts join forces to exert pressure, pound's "most vulnerable" moment will come in two months.

Citigroup believes that now is not the right time to go short on the pound, as they are targeting the second quarter - when the increasing political risk and rate cut cycle will create a "double blow" that will put pressure on the pound. Citigroup strategist Daniel Tenegau said that political risk and expectations of a rate cut are the core logic for shorting the pound. Although the market has "sporadically felt these two major risks" over the past week, he expects the opportune time to bet on a decline in the pound to come just before the local elections in early May. He said, "April and May, these themes will converge, and the pound may have a greater reaction. This is the time we want to be involved. It is still too early to seriously layout these scenarios." After the pound suffered a blow due to the resignations of key members of UK Prime Minister Stomer's core team, the pound-to-dollar exchange rate rebounded slightly this week, and the pound also regained some lost ground against the euro. As the pound's gains this year have largely been due to the weakness of the dollar, many strategists believe that the euro-pound exchange rate is the best way to express UK risks. Daniel Tenegau predicts that by the end of June, the pound will fall to 88 pence per euro, and further decline to 90 pence per euro by the end of September, compared to the current rate of 87 pence per euro. This forecast is more bearish than the mid-value prediction of 88 pence per euro by media surveys. The options market shows that since March, there will be an increase in selling pressure for the euro-pound, with the market expecting the Bank of England to cut interest rates. Daniel Tenegau predicts that the Bank of England's next rate cut will be in April, followed by further policy actions in July and November, at a magnitude higher than current market pricing. However, by that time, the impact of the elections will already be clear. Over the past year, the market has been unusually sensitive to any speculation about the future of Stomer or UK Chancellor Rives, with the premise being that any successor may reduce adherence to UK fiscal rules. Chris Turner, head of foreign exchange strategy at Dutch international group, said, "The prospect of change for both the Prime Minister and the Chancellor remains one of the core threats facing the pound this year. By the end of this month's by-election and the local elections in May, the UK political scene will be incredibly noisy in the coming months."