UK inflation and labour data key as BoE takes 'cautious approach'

Matthew Ryan, CFA Ebury

Quarterly and monthly GDP data from the UK confirmed that the economy was growing at a decent pace of about 1.5% a year around the time Andy Burnham took over as prime minister.

It will be interesting to see if the momentum carries out to the third quarter of 2026, where his premiership can start either taking the credit or the blame for the evolution of the economy.

This week's inflation and labour market numbers will be key for the Bank of England to decide whether to raise rates in 2026.

We are still expecting them to warrant a cautious approach to monetary policy tightening, and the market seems to be slowly converging to our view. We expect the core inflation subindex to continue moving towards the central bank target and post a small drop to 2.5% on an annual basis.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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