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.

Mar 20, 2024

EUR/USD seesaws in range ahead of Fed decision

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Lagarde speech: There are reasons to believe that disinflationary path will continue

"We expect that a pick-up in demand, if accommodated by fully utilizing hoarded labor, will lead to rising productivity growth," European Central Bank (ECB) President Christine Lagarde said while speaking at the ECB and Its Watchers XXIV conference in Frankfurt on Wednesday, per Reuters.