GBP: BoE is a secondary risk event compared to Spring Budget - ING

The Bank of England is widely expected to keep rates on hold today. ING's UK economist highlights how the deterioration in employment sentiment is still to show in official data. That should prevent the BoE from sounding much more dovish given a backdrop of sticky services inflation and wages. This morning, jobs figures for January showed unemployment was unchanged at 4.4% and wage growth was still close to 6%, ING's FX analysts Francesco Pesole notes.

BoE is widely expected to keep rates on hold

"Markets aren't pricing in any easing risk today, but February's widely expected rate cut brought about a surprise vote split as former arch-hawk Catherine Mann voted for a larger, 50bp reduction. We expect that she will join perma-dove Swathi Dhingra as the only two members voting for a cut today. The risk is probably that dovish-leaning Alan Taylor joins them to make it a closer 6-3 vote split for a cut."

"That may be read as a marginally dovish signal and partially weigh on sterling today, but markets seem to be aware that data progress is needed to tilt the balance decisively to the dovish side. Our call remains slightly more dovish than pricing as we expect three more 25bp reductions this year."

"GBP saw some strengthening against the euro yesterday, mostly thanks to its higher beta to global sentiment and some unwinding of EUR/USD longs. The UK government announced plans to scale back social benefits yesterday, and Labour officials have signalled Chancellor Rachel Reaves will not raise taxes at next week's Spring Statement. This means spending cuts, which will be closely scrutinised by gilt investors."