Bank of France: The pound has become the "weakest currency in Europe", recommending three options strategies to go long on the euro/pound.

Crdit Agricole's in-depth analysis of the pound sterling shows that the current pound is facing multiple unfavorable factors and is expected to further weaken. The UK is facing a combination of fiscal and monetary policies that are unfavorable to the pound - it is expected that fiscal policy will be further tightened in the November budget, followed by a rate cut. The government needs to control spending to establish fiscal credibility, but actual implementation is difficult and tax increases are unavoidable. High inflation has slowed the pace of rate cuts by the Bank of England, with only 50%-60% of its rate cycle completed, while the European Central Bank has completed 80%-90% of its easing cycle. The market's expectation of a rate cut by the Bank of England in November is close to 50%. In terms of exchange rates, the euro is expected to rise to 1.25 against the US dollar next year, while the pound is seen as the weakest European currency. The euro against the pound exchange rate (EUR/GBP) is expected to gradually rise to 0.90. The current EUR/GBP exchange rate is consistent with its short-term interest rate differential and is expected to show an unbalanced upward trend. Trading strategy-wise, Crdit Agricole suggests using structural opportunities in the options market. Due to the high skewness of the bullish bias of EUR/GBP, the options market maintains bullish expectations through top premiums, and low-cost strategies can be implemented to obtain positive Theta income while protecting positions valued at market prices. Specific strategies include: buying EUR/GBP 3-month bullish spread 1x2 (strike price 0.8720/0.8860, zero cost), with break-even point at 0.90; buying EUR/GBP 2-month call option (strike price 0.88, knock-out at 0.9050, indicative price 0.16%); buying EUR/GBP 3-month digital call option (strike price 0.90, indicative price 12.5%). In terms of positions, the first two strategies are recommended to hold until expiration, while the digital call option can be closed early when it appreciates slowly to recover time value. It should be noted that if EUR/GBP appreciates quickly, the bull spread strategy needs spot Delta hedging to address short gamma risk. In terms of risk warnings, investors buying the bullish spread face unlimited risk when EUR/GBP exceeds 0.90, as the short strike price is higher than the long strike price; the knock-out call option will expire when EUR/GBP hits 0.9050; the risk of digital call options is limited to the initial premium. In addition, rapid spot appreciation may lead to Gamma risk, which requires hedging measures.