UK money markets have yet to fully react to Bank of England Governor Andrew Bailey's speech last Friday, ING’s FX strategist Chris Turner notes.

Bailey remains concerned over the ‘intrinsic’ inflation

“Unlike Powell, Governor Bailey remained concerned over the ‘intrinsic’ inflation in the economy and also felt that the economic costs of tighter policy could be less than what they were in the past. His comments stand to keep a wedge between US and UK rates, where money markets continue to price a shallower and slower easing cycle for the BoE.”

“GBP/USD could see some consolidation in a 1.31-1.32 range before moving higher still. EUR/GBP could make a run towards its recent 0.8400 lows. And it looks like we'll have to revise our medium-term sterling profile higher.