Economists at ING analyze Pound Sterling (GBP) outlook ahead of Thursday’s Bank of England (BoE) decision.

GBP may absorb any further recovery in the Dollar better than most other currencies

February’s CPI figures released on Wednesday could have a big say in what the BoE announces on Thursday. The focus will remain on services inflation, which we expect to decelerate but remain elevated at 6% (also in line with the Bank’s forecasts). 

After dropping its hawkish tone in February, we don’t see the Bank being in any rush to take further steps to the dovish side of the spectrum just yet, at least barring a major downward surprise in CPI on Wednesday. 

Ultimately, the Pound may absorb any further recovery in the Dollar better than most other currencies, and we see EUR/GBP stabilising around the 0.8500 or trading closer to the big 0.8500 support in the short term.