Bank of England Urged to Provide Strong Response to High Inflation to Support Pound, says Saxo Bank

According to Saxo Bank, the Bank of England (BOE) must respond strongly to the higher-than-expected inflation data in order to support the British pound. John Hardy, Saxo’s head of forex strategy, warns that a small interest rate hike and finger-pointing could have devastating effects on the pound. The market has already priced in rate rises for the next three meetings, so the BOE may need to raise rates by 50 basis points and indicate further increases to boost the pound. The fact that sterling declined despite the high inflation print indicates doubts about the BOE’s ability to deliver. As a result, GBP/USD fell 0.3% to 1.2727, while EUR/GBP rose 0.6% to 0.8604.