Sterling Poised for Gains as UK Inflation Data Could Influence Bank of England's Rate Strategy

The British pound is projected to strengthen this week, driven by upcoming UK inflation data that may reinforce the Bank of England’s cautious stance on interest rate cuts, according to ING Group analyst Chris Turner.Services inflation is anticipated to remain above 5%, which could encourage the central bank to maintain its gradual approach to monetary easing. This cautious positioning underscores the Bank of England’s focus on managing inflationary pressures without abrupt policy changes.Meanwhile, last week’s weaker-than-expected UK economic growth data spurred a surge in the EUR/GBP pair, reaching a two-week high of 0.8335, reflecting market volatility ahead of key inflation indicators. As traders eye the upcoming inflation report, the pound’s trajectory could hinge on the data's alignment with expectations.