British Pound: BoE seen on hold as risks linger – UOB

UOB strategists note GBP/USD edged up to 1.3326, with Gilts caught between fiscal risks from Prime Minister Burnham’s debut plans and the Oil price shock. A Bloomberg poll and UOB economist Lee Sue Ann both expect the Bank of England (BoE) to keep rates at 3.75%, with modest upside risks to further tightening but no imminent move given softer demand and a loosening labour market.

Sterling steady with BoE likely sidelined

"GBP/USD edged up 0.1% on Friday to 1.3326, with Gilts caught between twin risks from PM Burnham's debut fiscal plans and the oil price shock."

"According to a Bloomberg poll of seven analysts (as of 25 July), all respondents unanimously expect the BoE to hold rates unchanged at 3.75%. Our economist, Lee Sue Ann, also expects a hold in July."

"While risks remain modestly skewed toward further tightening, any move is unlikely to be imminent absent a renewed upside shock to energy prices. Energy price volatility and still-elevated services inflation continue to pose upside risks, and a second dissent highlights growing unease within the MPC."

"That said, softer domestic demand and a gradually loosening labour market should keep the BoE on hold for now."