GBP holds firm as inflation expectations rise – BBH

The Pound Sterling (GBP) is steady against most peers after the Bank of England’s August DMP survey showed inflation expectations climbing to five-month highs, reinforcing a cautious approach to policy easing. However, persistent price pressures alongside weak UK growth prospects could weigh on GBP, particularly versus the euro, BBH FX analysts report.

BOE survey signals cautious easing path

"GBP is firm versus most currencies. The Bank of England’s August DMP inflation expectation survey ran hot and will keep the bank on a cautious easing path. 1-year inflation expectations rose to a five-month high of 3.4% vs. 3.2% in July. 3-year inflation expectations also increased to a five-month high of 3.0% vs. 2.8% in July."

"Overall, elevated UK inflation expectations and a sluggish growth outlook spell trouble for GBP, especially versus EUR."