MUFG: Falling UK Inflation Trend Could Weaken Pound

MUFG analyst Derek Halpenny said in a note that U.K. short-term inflation expectations should fall soon, with the pound weakening as expectations for Bank of England interest rates ease.
He said that with recent CPI data suggesting food inflation had peaked and UK supermarkets had announced plans to cut prices, utility bills should fall from July onwards.
This should mean “a more meaningful decline in inflation in the coming months and will lead markets to doubt how much the BoE will need to raise rates going forward.”
The agency expects two more rate hikes from the BoE, compared with five currently expected, which would remove some of the current support for sterling yields.