The British pound rose to a two-week high against the euro on Thursday, inching 0.17% higher at 85.30 pence after data from the Bank of England (BoE) showed that UK companies have lowered their expectations for selling price inflation.
BoE’s Decision Maker Panel showed that output price inflation fell to 5.3% in the three months ending in June. Output price inflation was 5.4% for the three months ending May. June’s reading is the lowest since March 2022.
Given this cooldown, markets now expect the BoE’s interest rate to peak at 6.5% in February. BoE officials are still undecided on further rate hikes, monitoring economic data closely for guidance.
Andrew Bailey, Governor of the BoE, stated that the central bank must continue to adjust its monetary policy accordingly in order to attain its 2% target for UK inflation.
“Markets remain highly sensitive to any incoming developments on the price side and the still quite aggressive BoE tightening expectations,” Francesco Pesole, FX strategist at ING observed.