RaboResearch forecasts EUR/GBP near 0.87 and GBP/USD dips to 1.33 amid softer UK inflation and labor market slack.
The British pound has recovered most losses after May UK CPI data showed headline inflation steady at 2.8% year-over-year, while core inflation edged up slightly to 2.6%. The figures suggest UK inflation may peak lower than previously expected, easing pressure on the Bank of England (BoE).
RaboResearch highlights softer inflation, labor market spare capacity, and tighter financial conditions as key factors. Market expectations for aggressive BoE tightening have eased, though elevated rates and political uncertainty persist. The bank expects EUR/GBP to rise toward 0.87 and GBP/USD to dip to 1.33 over the next 1-3 months.
BoE caution and shifting market rates may delay further policy action, with investors focusing on upcoming minutes and voting patterns for clues on future moves. Political risks and oil price volatility add to the pound’s near-term challenges.