According to ING FX strategist Francesco Pesole, markets will hear from both ends of the Bank of England’s policy spectrum on Thursday, with hawkish MPC member Catherine Mann and dovish member Swati Dhingra scheduled to speak.
EUR/GBP seen at 0.88 by year-end
Pesole notes that the latest UK CPI data offered mixed signals: hawks may emphasise the rebound in food inflation, while doves can point to several months of easing in services inflation. As Chief Economist Huw Pill said earlier in the week, the December policy decision remains finely balanced. Pesole adds that doves may need only one additional vote to secure a rate cut, and he believes a restrictive budget next week, combined with incoming data, could provide that support.
He also highlights that sterling is currently trading with a moderate risk premium, which is likely to persist until the 26 November Budget. The government’s reversal on income tax increases has heightened uncertainty and unsettled gilt markets.
ING maintains its year-end forecast of EUR/GBP at 0.88, expecting the current risk premium to ease after the Budget, though partially replaced by more dovish rate expectations.
