Sterling shrugged off a surge in UK inflation on Tuesday as investors took their cue from soft retail sales and housing data that suggested the slowing economy could herald lower interest rates later this year.
Consumer price inflation surged at an annual rate of 4.4 percent last month, official data showed, but rates futures markets maintained their tentative bets that the Bank of England will lower policy rates before the end of the year.
The CPI report was released after the pound had traded as low as $1.8970 earlier in the global session - a trough not seen since November, 2006 - and a day before the BoE publishes its eagerly-anticipated quarterly inflation report.
"People are only too well aware of the oil price decline, so maybe people are starting to look ahead at what the BoE will do in six to nine months' time, not just on the back of this number," said Simon Derrick, senior strategist at The Bank of New York Mellon.
At 1425 GMT sterling was down almost half a percent on the day against the dollar at $1.9020 and the euro was up over half a percent at 78.35 pence. Earlier on Tuesday the British Retail Consortium said like-for-like retail sales in July were 0.9 percent down on a year ago, while the Royal Institution of Chartered Surveyors said house prices fell again in July and the number of completed sales per surveyor slumped to their lowest in at least 30 years.
The rise in annual CPI, meanwhile, was easily the highest since the BoE gained its independence over a decade ago, sharply up from the previous month, well above forecasts and more than double the Bank's mid-point target.
Comments
Comments are closed.