Sterling to face a volatile week – Commerzbank

The uncertainty about the inflation outlook remains high in the UK. Next week’s data will be key to determine the next rate hikes of the BoE, causing volatility in GBP exchange rates, economists at Commerzbank report.

A rate hike in March is not off the agenda yet

“A rate hike in March is not off the agenda yet, seeing that upside risks for inflation are high. It will have to become clear for example how strikes by public sector workers affect wages. As the labour market also remains quite tight there is the risk of second-round effects.”

“In the end, the BoE has no choice but to wait for further data publication to get a better impression. There will be more opportunity to do that next week when labour market and inflation data is going to be published. Sterling is therefore likely to face a volatile week.”