BOE Pill Warns Second-Round Inflation Effects May Be Stronger

Bank of England Chief Economist Huw Pill warned that the second-round effects of inflation may prove stronger than initially anticipated, adding that policymakers should remain focused on tackling these persistent price pressures. Speaking on Thursday, Pill noted that while the disinflation process had stalled even before the recent Iran conflict, the central bank does not expect the second-round effects to be as deep as those seen in 2022. His remarks come as the British pound came under renewed selling pressure, with GBP/USD sliding to fresh session lows and breaking below the key 100-day moving average at 1.3481.

The pound's weakness reflects a combination of broad-based US dollar strength and lingering political uncertainty in the UK. The dollar has been buoyed by expectations that the Federal Reserve will maintain higher interest rates for longer, widening the rate differential in favor of the greenback. Meanwhile, domestic political headwinds are weighing on sterling sentiment. For currency traders, the break below the 100-day MA is a technically significant development, as the level had provided support during the previous session. Live forex prices and charts on NowPrice show the pair testing lower levels, with the next support zone around the 1.3400 handle.

Looking ahead, market participants will closely monitor upcoming UK inflation and GDP data for further clues on the Bank of England's policy path. Pill's hawkish tone suggests the BoE remains vigilant against entrenched inflation, which could limit the scope for rate cuts this year. On the US side, additional comments from Federal Reserve officials and key economic releases will drive USD direction. Traders should also watch for any escalation in geopolitical tensions or shifts in UK political stability, as these could amplify sterling volatility. The 1.3400 level and the 200-day moving average are key technical markers to watch in the coming sessions.