UBS – British pound faces dollar dominance amid inflation and BoE rate cut

A note from UBS highlights that despite stronger-than-expected UK inflation data and a recent rate cut by the Bank of England, market sentiment remains bearish on the British pound.

The pound briefly spiked above $1.27 against the dollar after Wednesday’s robust CPI report, but gains were swiftly erased, reflecting broader dollar strength driving the GBP/USD pair. UBS attributes this dynamic to the market’s focus on U.S. dollar momentum rather than UK-specific factors.

The inflation figures underscore BoE Governor Andrew Bailey’s cautious stance, aligning with his recent call for a gradual approach to policy easing. This comes after the central bank reduced rates by 25 basis points to 4.75% on November 7.

For now, UBS suggests that the dollar’s dominance and the BoE’s measured policy path will likely keep sterling under pressure.

This article was written by Eamonn Sheridan at www.forexlive.com.