The release of January’s UK inflation data this morning has had little impact on the pound. Headline CPI accelerated to 3.0%, just above our 2.9% forecast and the consensus of 2.8%. However, this is primarily due to an unexpected surge in food prices in January, and markets are attaching little weight, ING’s FX analysts Francesco Pesole notes.

A move to 0.820 is not out of scope

"Services inflation came in marginally lower than expected at 5.0%. Although this marks a 0.6% acceleration from last month, December's figures were artificially low due to improper measurement of Christmas airfares."

"More significantly, our measure of core services, which excludes volatile items (including airfares) and rents, has shown steady improvement, now at 4.2%, down from 4.7% two months ago. We expect this benign trend in services inflation to persist in the second quarter and support our projection of one rate cut per quarter this year."

"EUR/GBP broke below 0.8300 yesterday as the euro continued to show idiosyncratic underperformance likely linked to the EU’s geopolitical isolationism relative to the US. We’d be careful picking a bottom in the pair just yet, and a move to 0.820 is not out of scope. In the longer run, we deem at least 25bp worth of dovish repricing is due in the GBP curve, which should offer some support to EUR/GBP."