A note from UBS highlights that despite stronger-than-expected UK inflation data and a recent rate cut by the Bank of England, market sentiment remains bearish on the British pound.
The pound briefly spiked above $1.27 against the dollar after Wednesday’s robust CPI report, but gains were swiftly erased, reflecting broader dollar strength driving the GBP/USD pair. UBS attributes this dynamic to the market's focus on U.S. dollar momentum rather than UK-specific factors.
The inflation figures underscore BoE Governor Andrew Bailey's cautious stance, aligning with his recent call for a gradual approach to policy easing. This comes after the central bank reduced rates by 25 basis points to 4.75% on November 7.
For now, UBS suggests that the dollar's dominance and the BoE's measured policy path will likely keep sterling under pressure.
