UK consumer prices were disappointing last month, and that is weighing on sterling today. With this latest news, it is increasingly unlikely that the Bank of England will raise rates anytime soon.
According to the Office for National Statistics, there was a slowdown in core inflation in the United Kingdom last month, dropping to 1 per cent from 1.2 per cent. While mostly expected, the stagnation emphasizes the concerns about the UK economy and indicates that it will be some time before the Bank of England decides to raise rates.
Sterling is mostly lower today, dropping even against the euro. With the eurozone showing some signs of life, the 19-nation currency is on the rise. Against the US dollar, the pound is losing ground due to policy divergence. Forex traders are looking for an interest rate decision from the Fed tomorrow. Even if US interest rates stay the same, there are expectations for a rate hike sometime in the nex few months, and that divergence is sending the pound lower against the dollar.
At 14:15 GMT GBP/USD is heading lower, dropping to 1.5382 from the open at 1.5428. EUR/GBP is higher, moving up to 0.7354 from the open at 0.7336. GBP/JPY is lower, falling to 184.3700 from the open at 185.4880.
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