""What is also notable in our view is the lack of a substantial GBP appreciation despite: a) strong wage data and b) strong services CPI" - Nomura.

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Pound Sterling remained the best performing major currency of the year in the midweek trading session but that could change during this Autumn's 'crisis season' in the markets if Nomura is right to be advocating that clients bet on large losses against the Dollar and Euro for the months ahead.

Avoiding a widely projected recession earlier this year has helped lift Sterling against all currencies in G10 economy grouping and most on the broader G20 board thanks partly to a resilient show from the economy but the cost of this outperformance could be counted fully in the near future with possible implications for Sterling.

"UK data surprises are likely to turn lower, as we progress through the late-cycle slowdown phase," writes Jordan Rochester, a strategist at Nomura, in a Tuesday note.

"This week is relatively quiet in the UK, but if flash PMIs fail to bounce back it could keep risk sentiment on the backfoot," he adds.

Interest rates have risen notably further since it became clear earlier this year the economy was outperforming prior Bank of England (BoE) forecasts for a protracted recession but some recent data has suggested higher rates are beginning to take their toll.

Above: Pound to Dollar rate shown at daily intervals alongside Pound to Euro rate.

Notably, the official measure of unemployment has edged higher throughout the year and more so in recent months due to a combination of workforce redundancies and a rise in the number of once 'inactive' workers - those neither employed nor looking for work - returning to the labour market to seek new employment.

However, so far at least the economy has continued to hold up while August's BoE forecasts suggested economic growth of 0.2% per quarter in the final half of the year.

"Our leading indicators still suggest strong disinflation pressures ahead, but the hard inflation data give a less convincing picture for the BoE to consider. Then when it comes to labour markets it's probably a mixed bag for the BoE, with very strong wage growth but full-time workers laid off and unemployment rising," Rochester says.

"We still expect two more hikes from the BoE. But markets are toying with the idea of three (66bp priced by year-end), a number we expect to be proved wrong, as we get closer to December’s meeting," he writes while tipping GBP/EUR as a sell last week.

Bank Rate was raised to 5.25% in August, from 0.1% back in December 2021, making for its second most substantial increase in the 329-year history of the BoE but with inflation still sitting above the two percent target many analysts, economists and financial markets also expect further increases in the months ahead.

Above: Pound Sterling relative to G10 and G20 currencies in 2023. Source: Pound Sterling Live.

Nomura has for months already forecast the Pound to end the current quarter in September at 1.26 against the Dollar and something like 1.1235 against the Euro, down from 1.27 and 1.17 currently, but told clients this week there is a risk of GBP/USD falling as far as 1.22 by the end of October.

The strategy team is betting accordingly with targets and forecasts that imply losses of around four percent for each pair within a short space of time, and are projected to be seen in a period that has been seasonally associated with increased financial market volatility over a lengthy period.

September, October and November have also played host to various economic or market crises involving the UK including the stock market collapse of 1987, the exit from the European Exchange Rate Mechanism in 1992, the global financial crisis in 2008 and the collapse of Sterling following the Liz Truss budget last year.

"What is also notable in our view is the lack of a substantial GBP appreciation despite: a) strong wage data and b) strong services CPI," Rochester says.

"High frequency ETF outflows, falling capex intentions, net FDI outflows and lacklustre net fixed income flows despite higher yields do not paint a pretty flow picture," he adds.

Above: Pound to Dollar rate shown at weekly intervals alongside Pound to Euro rate.