Bank of England’s reluctance to tighten policy contrasts with ECB hawkishness, pressuring sterling toward key support levels.
ING analysts expect the British pound to decline against the euro and US dollar as the Bank of England avoids tightening this year. Markets price just 21 basis points of hikes for September, reflecting limited BoE action amid easing inflation expectations among corporates.
The European Central Bank’s hawkish stance and fragile equity sentiment further weigh on sterling. EUR/GBP is forecast to rise toward 0.8680, while GBP/USD may test 1.3300, with downside risk to 1.3200 in a risk-off environment.
Sterling’s sensitivity to risk sentiment, given its large financial sector, amplifies its vulnerability. Upcoming ECB decisions and equity market volatility could drive further downside for the currency.