Broker ING flagged potential downside risks for the British pound, noting the currency's recent decline from its peak against the euro. The sensitivity of the pound to the performance of US stocks has been highlighted as a contributing factor to its movement.
The company also noted a decline in the pair's volatility as the market anticipates key UK CPI numbers due next week.
The UK economist at ING points out that there may be a tendency towards dovishness in expectations regarding the Bank of England's monetary policy. The company maintains a positive outlook on the potential for the EUR/GBP pair to rise, as market participants may increase their bets on a possible interest rate cut by the Bank of England in June.
British financial markets focused on the speech by Katherine Mann of the Bank of England, considered the most hawkish member of the Monetary Policy Committee (MPC).
The event followed comments made by Meghan Green, who recently shared a cautiously optimistic view on inflation, echoing sentiments expressed by Bank of England Governor Andrew Bailey at a recent meeting.
ING's comment comes as investors and analysts closely monitor the central bank's moves, which could significantly impact currency valuations. The expectation of UK CPI data and the Bank of England's potential response are key factors in the company's analysis of the pound's path.
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