Sticky UK inflation and firmer activity data have limited expectations of Bank of England rate cuts and supported the Pound. Softer labour data has not led to a large shift towards a more dovish outlook.<\/p>\n
A by-election in Greater Manchester on 26 February is linked to higher near-term GBP volatility. The Pound\u2019s limited response to stronger data last week suggests positioning may be restrained until after the vote.<\/p>\n
EUR\/GBP is expected to drift lower once political uncertainty eases. Recent UK growth indicators are described as improving and may continue to strengthen.<\/p>\n
The Pound is being supported by sticky inflation and a surprisingly resilient economy, which is limiting how quickly the market expects the Bank of England to cut rates. January’s inflation figures came in at 2.9%, still stubbornly above the central bank’s target. This economic strength is providing a floor for the currency for now.<\/p>\n
However, we are seeing hesitation from investors, reminiscent of the political uncertainty we faced around the by-election this time last year in 2025. With the Chancellor’s Spring Budget scheduled for March 11th, short-term volatility in the Pound is likely to remain elevated. This suggests that the positive economic data is being held back by upcoming political event risk.<\/p>\n
For derivative traders, this environment of high uncertainty but a firm underlying trend presents specific opportunities. The rise in one-month implied volatility suggests options are pricing in a significant move, making strategies like buying straddles or strangles potentially useful to capture a breakout after the budget is announced. This allows traders to benefit from a large price swing without needing to predict the exact direction.<\/p>\n
Looking back, we saw EUR\/GBP drift lower after the political risks faded in late February and early March of 2025. If the budget passes without major negative surprises, we could see a similar dynamic play out, where the Pound’s strength begins to reflect the economic data more clearly. Therefore, positioning for a retracement lower in EUR\/GBP after the budget could be a prudent medium-term strategy.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Sticky UK inflation supports Pound; rate-cut hopes tempered. By-election boosts volatility; EUR\/GBP likely lower post-vote.<\/p>\n","protected":false},"author":62,"featured_media":17030,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42573","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t