Seasonal trends reveal the potential for Pound Sterling strength in two popular currency pairs in next month's trading.

The Pound Sterling has been battered since last week, as the Bank of England (BoE) confirmed the need for an interest rate cut in the coming months. GBP/USD languished at around 1.2616 in Asian session trading on Thursday (28/March), while EUR/GBP held in a narrow range between 0.8570-0.8580. However, some analysts think seasonal trends could boost the Pound Sterling rate next month.


Kamal Sharma, Forex Strategist at Bank of America, revealed, "April is the sweet spot for GBP. If history is any guide, a test of $1.30 in GBP/USD is likely."

Kenneth Broux, Forex Analyst at Société Générale, shared research with similar conclusions. He further explained that the most notable pound strengthening usually occurs in GBP/USD, followed by GBP/EUR.

"April ranks among the best months of the year for the pound thanks to the repatriation by corporates of overseas FX for dividend payments. The average percentage monthly gain of the last ten years in April is 0.8%. The standard deviation is 2.2%," Broux said.

"The pullback in GBP/USD attracted buyers right on the 200dma (1.2591). This could be the prelude to a rally back over 1.28 towards 1.30 if seasonality is a guide," he says. "Seasonality in April is also typically bearish EUR/GBP."

Seasonal trends aside, sterling's valuation is signalling a rebound opportunity. Sterling's recent selloff has dethroned it from an overbought area, opening up the opportunity for a bounce back to higher ranges.

"Our FX flow data points at banks, corporates, hedge funds and real money investors inflows. All in all, the GBP is no longer in overbought territory," says Valentin Marinov, Head of G10 FX Strategy at Crédit Agricole.