The Pound Sterling has traded in narrow ranges recently, with gains limited as investors weigh softer UK growth signals against still-elevated inflation pressures.
Pantheon Macroeconomics notes that UK economic momentum is cooling, with weaker activity and a gradual easing in labour market conditions.
“UK economic momentum is softening, with signs that demand and hiring are losing some traction.”
The consultancy expects inflation to continue trending lower as wage growth moderates, reducing the need for further Bank of England tightening.
“Easing wage pressures should allow inflation to trend lower, reducing the need for further policy tightening.”
In the near term, Pantheon sees the Bank of England remaining cautious, with policy likely to stay restrictive but with a growing bias towards easing later this year.
Overall, the softer growth backdrop is expected to cap Sterling upside, with markets increasingly focused on the timing of eventual rate cuts.
