Wage data in the UK came in higher than expected, lifting the Pound. But GBP/USD could drop back below 1.21 following the US Consumer Price Index (CPI) report, economists at ING report.

Sticky wages cement BoE March hike expectations

“The Bank of England’s preferred measure of wage growth, the 3-month/3-month annualised change has now been consistently above 7% for a few months, and there is very little evidence of that wage slowdown suggested by some surveys.”

“Tomorrow’s CPI release will be another key event for the pound, but we think that given the increased focus of the Bank of England on wage dynamics, today’s data strongly endorses a March 25 bps rate hike (which is our base case).”

“EUR/GBP may well break below 0.8800 this week, while GBP/USD could fall back below 1.2100 after the US CPI print.”

See – US CPI Forecast: Preview from 12 major banks, inflation continues to decelerate