UOB strategists note GBP/USD edged up to 1.3326, with Gilts caught between fiscal risks from Prime Minister Burnham’s debut plans and the Oil price shock. A Bloomberg poll and UOB economist Lee Sue Ann both expect the Bank of England (BoE) to keep rates at 3.75%, with modest upside risks to further tightening but no imminent move given softer demand and a loosening labour market.

Sterling steady with BoE likely sidelined

"GBP/USD edged up 0.1% on Friday to 1.3326, with Gilts caught between twin risks from PM Burnham's debut fiscal plans and the oil price shock."

"According to a Bloomberg poll of seven analysts (as of 25 July), all respondents unanimously expect the BoE to hold rates unchanged at 3.75%. Our economist, Lee Sue Ann, also expects a hold in July."

"While risks remain modestly skewed toward further tightening, any move is unlikely to be imminent absent a renewed upside shock to energy prices. Energy price volatility and still-elevated services inflation continue to pose upside risks, and a second dissent highlights growing unease within the MPC."

"That said, softer domestic demand and a gradually loosening labour market should keep the BoE on hold for now."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)