Hot UK CPI lifts GBP, but risks loom – BBH

Pound Sterling (GBP) had a kneejerk uptick after the hot UK June CPI print reduced the likelihood of a more dovish BOE policy stance, BBH FX analysts report.

GBP briefly up; EUR shorts preferred

"Headline rose to 3.6% y/y (consensus & BOE projection: 3.4%) vs. 3.4% in May, the highest since January 2024. The largest upward contribution came from transport. Core CPI increased to a two-month high at 3.7% y/y (consensus: 3.5%) vs. 3.5% in May while the policy-relevant services CPI printed for a second straight month at 4.7% y/y (consensus: 4.5%, BOE projection: 4.6%)."

"In our view, the combination of high UK underlying inflation and a sluggish growth outlook spell trouble for GBP. We prefer to be short GBP versus EUR rather than USD in part because the ECB is nearly done easing."