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- Downside risks likely exceed the upside for the Pound – ING
Downside risks likely exceed the upside for the Pound – ING
Economists at ING analyze GBP outlook ahead of Wednesday’s UK inflation.
CPI is a big risk event
The faster-than-expected inflation deceleration in the US hit the Pound in some non-Dollar crosses, largely because of the vulnerability of the ultra-hawkish BoE market rate expectations. Such vulnerability of the Pound remains very much present now as markets continue to factor in 130 bps of tightening to a peak in the UK, leaving ample room for dovish repricings.
This week’s UK CPI print is thus a major risk event for Sterling since signs of deceleration in price pressure would likely nudge the dial in favour of 25 bps over a half-point hike in August. Markets currently price in 45 bps for August, so the downside risks likely exceed the upside for the Pound.
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