In the UK, the cost-of-living crisis and sluggish growth may impede the Bank of England’s ability to confront soaring inflation and satisfy market expectations for tighter policy. This will weigh on the pound broadly, in the view of economists at Scotiabank.

Negative outlook on surging inflation

“Sterling’s outlook is negative and sentiment and positioning remain appropriately bearish.”

“The BoE is likely to tighten policy again in September (50 bps) to curb surging inflation but weak growth prospects and the growing cost-of-living crisis as UK households face further, significant increases in energy costs in the coming months, suggest that there is only so much the economy can bear.” 

“We expect cable to trade below 1.20 into year-end.”