GBP: Don't expect much from Bailey – ING

Bank of England (BoE) Governor Andrew Bailey speaks today in Jackson Hole (1600) and we think he may emulate Powell’s approach in saying as little as possible. Bailey does not have to deal with aggressively dovish pricing (-39bp by year-end), but the UK still needs to gain much more confidence on the inflation front, ING’s FX strategist Francesco Pesole notes.

A rebound to 0.8550-0.8600 remains highly likely

 “August has not really seen many remarks from BoE policymakers: the latest ones were from a hawk, Catherine Mann, who once again emphasised the risks of structural wage-price inflation. Before then, it was Chief Economist Huw Pill who spoke on 2 August and said the BoE shouldn’t be promising rate cuts in the very short term.”

“There is a good chance Bailey’s speech will be a non-event for sterling. EUR/GBP has returned below 0.8500 on the back of eurozone-UK growth differentials, but we remain wary of chasing the pair lower given the rate-spread picture. A rebound to 0.8550-0.8600 remains our call for the coming weeks.”