GBP: Will BoE remain trapped with sticky wages? - ING

All the UK action this week comes on Thursday. That's when we'll see both the next instalment of UK wage data and the Bank of England MPC meeting, ING's FX analyst Chris Turner notes.

The market prices 53bp of BoE rate cuts this year

"On the former, consensus expects little leeway for the BoE to turn more dovish in that private sector wage growth is expected to remain above 6% three-month annualised. And there should not be much of a communication change at the BoE meeting, where we expect a 6-3 vote in favour of unchanged rates."

"Currently, the market prices 53bp of BoE rate cuts this year. Our house view is for 75bp. And a potential catalyst to that dovish re-pricing is next week's Spring Statement from UK Chancellor Rachel Reeves. UK press reports are fixated on which government departments are at risk for spending cuts and the narrative of tighter fiscal policy looks a bearish one for sterling next week."

"With the dollar also fragile, any sterling weakness may well come against the euro or the Japanese yen as investors opt for defensive positioning in equities ahead of the next burst of US tariffs in April. From levels near 193 today, GBP/JPY could well drop back to the 187 area over the coming weeks."