The British pound gained support after the Bank of England issued a policy statement that was less dovish than markets had expected, according to analysis published by ING on Friday.
Several policymakers at the BoE pointed to ongoing concerns over elevated wage growth expectations and structural inflation pressures, factors that helped underpin sterling’s performance.
ING analysts noted that wage growth expectations are likely to ease in early 2026 as headline inflation continues to moderate. However, they believe inflation dynamics remain sticky enough for policymakers to maintain a cautious stance in the near term.
The bank continues to forecast 25 basis point interest rate cuts in both February and April, a view that contrasts with current market pricing, which implies only one rate cut over that period.
Based on this outlook, ING expects the EUR/GBP exchange rate to remain supported above the 0.87 level in the coming months.
