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Pound Sterling "risks" a rapid move higher that could catch the market by surprise, according to a trading strategist at French investment bank Société Générale.

Olivier Korber, an FX derivative strategist, says to "fade the consensus" on UK economic gloom and position for positive surprises that will be expressed in a stronger Pound against the U.S. Dollar.

"The dollar is turning sharply down, and FX positions are shifting quickly. As very negative sentiment has been weighing on sterling, there is a risk GBP/USD moves towards 1.30 much faster than anticipated by our forecasts," he says in a new note.

Soc Gen's economists are more optimistic about the UK's economic growth prospects than the consensus, seeing 0.6% growth in 2024 versus 0.8% for the eurozone and 0.9% for the U.S.

The consensus sees only 0.4% growth for the UK, "and would make the UK economy underperform even Sweden and be the slowest economy next year. This leaves almost no room for negative UK economic surprises versus peers."

Economic surprises are a powerful driver of foreign exchange markets as they shift investor expectations for future central bank policy.

Currencies tend to benefit when economic releases surprise to the upside, but the Pound has struggled since August as the UK's data pulse has disappointed.

But now with UK economic expectations at rock bottom, the only way is up from here.

The analyst is also concerned that the market is 'pricing in' an aggressive Bank of England interest rate cut regime for 2024.

"BoE and Fed implied pricing for June 2024 has converged, with the first rate cuts expected by mid-year. But the market might be too dovish regarding the BoE given growth and inflation paths in the US and UK," says Korber.

He cites communication from Bank of England Governor Andrew Bailey that "it's really too early to be talking about cutting rates".

The Pound advanced on Tuesday after Bailey and other members of the Monetary Policy Committee reiterated that it was too soon for the market to be pricing rate cuts. In fact, MPC members Mann and Ramsden said rate hikes could still be appropriate in the future.

Societe Generale notes UK inflationary pressures will be sustained by wages, which have risen much faster than in the U.S. and euro area, and expect inflation-adjusted wage growth to remain solidly in positive territory.

The Treasury on Tuesday announced the UK minimum wage is to increase by more than a pound to £11.44 per hour from April next year, which is above 10% and outstrips the rate of inflation. It was also decided the rate would apply to 21 and 22-year-olds for the first time.

The Treasury said this is the biggest-ever increase to the National Living Wage, worth over £1,800 a year for a full-time worker.

"GBP/USD is already breaking free from monetary policy expectations, an early bullish move that is due solely to November’s dollar weakness. If the next leg comes from sterling strength, GBP/USD could go much higher," says Korber.