ING: The GBP - FJElite
Today’s UK April inflation data has come in a tad lower than we’d expected at 2.8% YoY, which, like yesterday’s jobs data, questions the need for aggressive rate hikes. Admittedly, the breakdown of the data isn’t too surprising. Rising fuel bills were more than offset by a wave of more tame administrative/regulatory price hikes at the start of the fiscal year, together with a temporary drag from the timing of Easter.
We now look for UK inflation to peak just shy of 4% later this year. A June rate hike looks pretty much 50:50, but it narrowly remains our call given ING's base case for energy prices. On that basis, we are less bullish on EUR/GBP in spite of the ongoing political turmoil.