The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Inflation and political uncertainty weigh heavily on sterling

With UK policymakers trapped between reducing inflation and boosting the flagging economy, analysts are struggling to see any upside for sterling.

Photo: iStock

Alongside the country’s political chaos, the UK’s economy is under enormous pressure – something that is clearly reflected in the fortunes of its currency. Research published by HSBC in July noted that sterling slipped 3.4% against the dollar in June, with the positive reaction to the Bank of England’s promise to act forcefully on inflation if needed fading towards the end of the month.

HSBC suggests the BoE will struggle to deliver as aggressive a hiking cycle as the US Federal Reserve, which should see sterling face ongoing downward pressure.

Parisha Saimbi, BNP Paribas Markets 360

While the BoE has indicated that it is open to a faster pace of tightening, its monetary policy committee (MPC) has tended to place a lot of weight on the outlook for growth, even if inflation has had greater sway more recently.

“With activity data slowing and rising risks of a disruption to gas supply, should the BoE hike by less than is priced in this year – as we expect – this is likely to weigh on the GBP,” says Parisha Saimbi, G10 FX strategist at BNP Paribas Markets 360, which expects the central bank to hike by 50 basis in August (as is well priced) before reverting back to 25bp increments, up to a terminal rate of 2.5%

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?