BoE will judge the stickiness in services inflation as down primarily to one-off factors and may look at more ‘core’ measures that instead point to a less worrying picture. There is room for a GBP correction, ING’s FX strategist Francesco Pesole notes.

There is room for a GBP correction

“Earlier this week, we stressed how GBP/USD looked expensive at 1.29 and EUR/GBP looked cheap at 0.84. We are, therefore, welcoming the downside and upside moves (respectively) of the past two days as a re-alignment with short-term rate differentials.”

“We think both those moves can have long legs as we expect a broad-based GBP weakening next week when the Bank of England will – in our view – cut rates.”

“We think the BoE will judge the stickiness in services inflation as down primarily to one-off factors and may look at more ‘core’ measures that instead point to a less worrying picture. Market pricing (-13bp) suggests there is room for a GBP correction.”