GBP: No major impact from BoE hold – ING

The sterling curve saw a minor 5bp hawkish repricing after the Bank of England’s consensus hold yesterday, ING's FX analyst Francesco Pesole notes.

Data uncertainty remains elevated

"There were two noteworthy aspects of the meeting: firstly, Catherine Mann has rapidly abandoned the dovish camp, leaving only one member voting against a hold, and secondly, we saw some reference to the fact that should data show greater job market instability, the BoE can draw disinflation-related conclusions and cut rates faster."

"Our call is unchanged – three cuts this year – but data uncertainty remains elevated. The UK is about to face the combined impact of the announced hike in corporate taxes, US tariffs, and a likely spending squeeze to be announced next week. The balance of risks looks tilted to the downside for growth – and intuitively for front-end GBP rates – but inflation has remained too sticky so far, and the Sonia pricing has remained understandably cautious (two cuts by year-end)."

"We still look with some concern at next week’s budget events from a sterling perspective. Implications for growth and the bond market argue against short-term bullishness on the pound. We still prefer playing any GBP weakness through Cable rather than EUR/GBP."