UK: Data and politics may see bullish GBP run take a temporary breather - ING

Viraj Patel, Research Analyst at ING, suggests that while the softer UK CPI print may have sowed some seeds of doubt over a May BoE rate hike, they think the initial knee-jerk move lower in GBP and UK gilt yields may have been a slight overreaction (though it is good to see that data is once again driving UK markets).

Key Quotes

“Moreover, the government defeat over the Customs Union following the House of Lords is not necessarily GBP negative in our view – in isolation it would not see a pick-up in UK political uncertainty that warrants a risk premium being priced into GBP (that would only occur if we also saw growing risks of a UK General Election or second Brexit referendum). We therefore retain our 1.45 target for GBP/$ in 2Q18 – though the bullish momentum may take a temporary breather for now.”