GBP: Sterling could hand back recent gains - ING

The Bank Of England's (BoE) trade-weighted sterling index has rallied 1.7% since the middle of January. The recovery from the gilt-triggered January sell-off has undoubtedly been helped by the rally in US Treasuries. Additionally, the recent focus on tariffs has been a EUR/GBP negative, with the UK less exposed and the UK perhaps even being granted a tariff exemption from the Trump administration - if this week's comments are to be believed, ING's FX analysts Chris Turner notes.

GBP/USD to top out this quarter in the 1.25/26 area

"However, the external environment may sour if US Treasury yields rise again, which is the house view. And the brief reprieve in the tariff noise should allow investors to refocus on the UK's fiscal and monetary mix. Fiscal will be a story for March, but today the monetary angle reappears with the Bank of England meeting."

"We expect an 8-1 vote to cut rates and a downward revision to growth forecasts to be a mild sterling negative. Much more negative would be a 9-0 vote, should arch-hawk Catherine Mann vote for a rate cut. We continue to favour GBP/USD topping out this quarter in the 1.25/26 area and see a strong case for it to be trading close to 1.19/20 later this year."