EU and UK strike Brexit deal on Northern Ireland. Positive momentum for Sterling is likely to be short-lived, economists at Commerzbank report.

Northern Ireland protocol to have little influence on inflation developments

“An agreement in the row about the Northern Ireland protocol has been reached between the United Kingdom and the EU. The positive momentum for Sterling is likely to remain limited though.” 

“An agreement in connection with the Northern Ireland protocol is likely to have little influence on short-term inflation developments and as a result the market is likely to return its attention to data publications and comments by BoE members again pretty quickly. In this context, we remain sceptical for Sterling.”

“The BoE remains hesitant as far as further monetary policy tightening is concerned and signalled recently that it would soon reach the end of the rate hike cycle. As long as it sticks to that view, while the data publications do not signal an improvement on the inflation front Sterling is likely to remain under depreciation pressure.”