The Pound Sterling (GBP) remains in a strong position, ING’s FX strategist Francesco Pesole notes.

BoE is deemed unlikely to cut rates next week

“The Bank of England is deemed unlikely to cut rates next week, and while the Sonia curve pricing can be affected by the Fed's dovish rerating, the data has so far prevented the sterling market from making the kind of dovish pivot we saw in USD swaps. The 1.3250 August highs in GBP/USD appear well within reach at this stage.”

“Looking at EUR/GBP, a tentative bounce earlier this week proved to be quite short-lived. The ECB-BoE and eurozone-UK growth outlook divergence continues to weigh on the pair, and while the pound is starting to look expensive in relative terms, a sustainable recovery to the 0.85+ levels likely requires some strong dovish hints by the BoE.”

“The next big event for GBP is the CPI figures released on Wednesday, one day before the BoE announcement. Until then, global FX dynamics will dominate, and the pound should remain broadly supported.”