Market News

LONDON, Feb 20 (Reuters) - The pound edged up on Thursday, as traders awaited UK data on consumer spending and business activity after this week's hot inflation print complicated the outlook for Bank of England monetary policy.

Sterling was last at $1.261, up 0.2% against the dollar by 1108 GMT. Against the euro it was unchanged at 82.795 pence.

Wednesday's UK inflation print showed consumer inflation rose faster than expected in January, which could weaken the case for the BoE to deliver another two rate cuts this year.

Traders are currently betting on two more rate cuts in 2025 from the BoE.
"Leading indicators suggest inflation will stay high in the UK, and growth may surprise positively. These factors could delay gradual rate cuts but won’t change the overall view of a slow disinflationary process," George Vessey, lead FX and macro strategist at Convera, wrote in a note.

The Office for National Statistics said its consumer price index rose at an annual rate of 3% in January, above forecasts for a rise of 2.8%. Services inflation, which the BoE has flagged as an obstacle, rose at a rate of 5%, from 4.4% in December, but was below expectations for rise of 5.2%.

The BoE's next meeting is still a month away, set for March 20.
Market players will be closely monitoring UK retail sales figures and preliminary business activity surveys data, both due on Friday, for a read on the strength of the economy. They will follow Tuesday's jobs data that showed accelerating wage growth and last week's GDP figures that showed Britain's economy unexpectedly grew by 0.1% in the final three months of last year.
"In addition to rate differentials supporting the pound, its sensitivity to global risk appetite will keep traders vigilant amidst geopolitical uncertainties. However, the UK is currently out of Trump’s tariff line, providing sterling an advantage over the euro," said Vessey.

Reporting by Lucy Raitano; Editing by Emelia Sithole-Matarise