Citigroup believes the current moment is not yet opportune for shorting the British pound, instead targeting the second quarter. During this period, escalating political risks combined with the onset of a monetary easing cycle are expected to deliver a "double blow," putting significant pressure on the currency. According to Citi strategist Daniel Tobon, political uncertainty and interest rate cut expectations form the core rationale for a bearish outlook on sterling. Although markets have had "sporadic exposure to these two risks" over the past week, he anticipates that the timing for substantial bearish bets will align with the approach of local elections in early May. Tobon stated, "In April and May, these themes will converge, and the pound could see a more pronounced reaction. That is the timing we want to participate in. It feels premature to seriously position for these scenarios right now." After recent pressure on sterling following the resignation of a senior member of Prime Minister Keir Starmer's core team, the pound has rebounded somewhat against the U.S. dollar this week and also recovered some ground against the euro. Given that much of sterling's gains this year have been driven by U.S. dollar weakness, many strategists view the euro-pound exchange rate as the optimal way to express views on UK-specific risks. Daniel Tobon forecasts that by the end of June, the pound will weaken to 88 pence per euro, and decline further to 90 pence per euro by the end of September, compared to the current level of approximately 87 pence. This projection is more pessimistic than the median strategist forecast of 88 pence for end-of-June in a media survey. Options market indicators suggest that selling pressure on the euro-pound pair will increase starting in March, as markets anticipate the Bank of England will begin implementing interest rate cuts around that time. Tobon expects the next Bank of England rate cut to occur in April, followed by further policy actions in July and November, with the magnitude of easing exceeding current market pricing. However, by that point, the impact of the election outcome will likely be clearer. Over the past year, markets have been highly sensitive to any speculation regarding the future positions of Prime Minister Starmer or Finance Minister Rachel Reeves, operating on the assumption that any successors might demonstrate less commitment to the UK's fiscal rules. Chris Turner, Global Head of Markets at ING, commented, "The prospect of simultaneous changes in both the Prime Minister and the Chancellor of the Exchequer remains one of the core threats to sterling this year. The by-election later this month and local elections in May mean UK politics will be exceptionally noisy in the coming months."