The UK Consumer Price Index (CPI) report will be released on Wednesday. Economists at ING analyze the Pound Sterling (GBP) outlook ahead of inflation data.
Services inflation to stay above 6%
Services inflation is what matters the most for the Bank of England at the current stage and we expect to see it at 6.1% this week, considerably below the Bank of England’s estimates. Despite the improvement in services disinflation, 6%+ remains too high and is unlikely to make the BoE endorse dovish rate expectations just yet.
EUR/GBP can retest the 0.8573 lows, but we expect it to find a bit more support this week as the Euro may benefit from some hawkish comments by ECB President Christine Lagarde in Davos. Our medium-term view on the pair remains bullish.
