GBP has scope to edge higher versus EUR – BBH
|Pound Sterling (GBP) weakens on UK’s soft inflation. Economists at BBH analyze GBP outlook.
The UK February CPI print reinforces the case for a BoE rate cut in August
Headline CPI rose slightly less than expected by 0.6% MoM (consensus: 0.7%) in February. Meanwhile, annual headline and core CPI inflation slowed in February to 3.4% (lowest since September 2021) and 4.5% (lowest since January 2022), respectively. This was 0.1pts lower than anticipated by market participants.
Nonetheless, we doubt the BoE will be in a rush to loosen policy because UK services inflation remains high. In line with the BoE’s forecast, annual services CPI inflation eased to 6.1% in February (consensus: 6.0%) from 6.5% in January. A first 25 bps BoE rate cut remains more than fully priced-in by money markets for August.
GBP has scope to edge higher versus EUR.
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