BNP Paribas: Our models are screaming that the pound is overvalued

The pound strengthened against the opinion polls, that show, that Britain will not leave the European Union on the upcoming referendum on June 23rd. The bank analyze the situation, based on their valuation models and data positioning in the currency market of the British pound.

The analysis shows the strengthening of the pound by reducing short positions in the currency.

Short-term model for assessing the fair value of the exchange rate of the bank shows that market interest rates lagging behind the foreign exchange market. According to the assessment in the short term rally in sterling, it makes it look overvalued against the dollar and the euro, given that the fair value of the EUR/USD is at 1.1349, and the fair value of the EUR/GBP is at 0.7909.

Bank analysts believe that the by current situation the movement of the pair GBP/USD could happen in another way, as bond yields  in Britain will start to grow.