Pound Steadies as BoE Hawks Gain Upper Hand

The UK pound has steadied against major peers, such as the euro and US dollar, thanks to recent data that reinforces the Bank of England's hawkish stance. According to Rabobank, stronger-than-expected inflation and wage growth figures have given policymakers more ammunition to resist rate cuts.

Rabobank strategists noted that these figures reduce the likelihood of a rate cut in the near term, which would typically support a currency by attracting yield-seeking capital. As a result, short-term gilt yields edged higher following the data releases, reflecting reduced bets on BoE easing.

The market's reaction has been muted but telling, with Rabobank's analysis suggesting that unless upcoming data shows a sharp slowdown in inflation or employment, the central bank may hold its policy rate steady through the summer. This means the pound could continue to find support in the near term, especially if the Federal Reserve and European Central Bank signal more aggressive easing paths.