The BoE seems to be chasing inflation developments rather than fighting them, damaging Sterling – Commerzbank

FXStreet Insights Team FXStreet

The BoE surprised yesterday and hiked its key rate from 4.50% to 5%. Interestingly enough Sterling was unable to benefit from the surprise decision. Economists at Commerzbank discuss GBP outlook.

BoE unable to convince

A central bank that is fighting decidedly against stubbornly high inflation levels would sound different. Instead, the BoE refers to its inflation projections. That means it still expects that inflation will fall notably over the course of the year. It has been expecting that for some time and at least the rise in core inflation paints a different picture.

So the impression remains of a central bank that was too slow in starting to hike its key rate and moved to smaller rate steps too early, even signalling a possible pause. The BoE seems to be chasing inflation developments rather than fighting them with an active monetary policy, which is damaging for Sterling. As we do not believe that the BoE will suddenly take a different approach, we remain sceptical for Sterling.

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

EUR/USD slumps below 1.1800 on hawkish Fed Minutes, eyes on ECB succession

The EUR/USD pair tumbles to a near two-week low around 1.1785 during the early Asian session on Thursday. The US Dollar strengthens against the Euro on hawkish FOMC minutes that revived speculation about potential interest rate hikes if inflation remains elevated.

GBP/USD extends decline as weak jobs data bolsters BoE rate cut bets

The Pound Sterling continued to backslide under sustained pressure on Wednesday, following through after the UK employment report on Tuesday showed a labour market deteriorating faster than expected.

Gold rises above $4,950 as US-Iran tensions boost safe-haven demand

Gold price holds positive ground near $4,985 during the early Asian session on Thursday. The precious metal recovers amid shifts in geopolitical sentiment, boosting safe-haven demand. Traders will keep an eye on the release of US Initial Jobless Claims, Pending Home Sales data, and the Fedspeak later on Thursday.

Zora launches attention markets on Solana network

Zora has launched a new attention markets feature on the Solana network, allowing users to trade and speculate on emerging online cultural trends.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.