Recent client meetings suggest growing foreign exchange investor interest in the UK's pound sterling, which is likely to continue offering favorable risk-adjusted 'carry' even after the Bank of England cuts interest rates, according to strategists at Credit Agricole.

"Next to improving UK economic fundamentals, the GBP could attract investors with its relative rate appeal that could remain in place despite the BoE cuts we expect in the coming months. Indeed, our risk-adjusted carry ranking suggests that long GBP/CHF and GBP/JPY are among the most appealing carry trades," Credit Agricole strategists said in a Wednesday note.

"In addition, our ETF tracker is pointing at growing unhedged inflows into UK stock-market ETFs. We expect this to continue as the UK growth prospects brighten up and given that UK stocks are looking cheap. Last but not least, we note that central bank

demand for GBP-denominated assets has grown in recent years," they added.

The UK economic growth outlook is brightening due to subsiding cost-push inflation, high levels of wage growth and improving political stability, Credit Agricole said.

These factors are a part of why Credit Agricole forecasts GBP/USD to end the year around 1.25 and EUR/GBP is projected to end the year at 0.84. The consumer bank's strategists expect sterling to perform better in 2025 with EUR/GBP falling further to 0.83 and GBP/USD rising back to 1.35 amid an expected downturn for US dollar exchange rates.