Sterling falls following UK inflation data

Sterling has taken another hit today against most major currencies following a fall in the headline inflation rate and taking pressure of the Bank of England to raise interest rates. As a result the pound fell back below 1.25 against the Euro and is now trading at its lowest level against the US dollar since April.

This data comes ahead of tomorrow’s key Bank of England minutes released at 09:30 and another release that may cause the value of sterling to fall. This report will indicate as to how the nine members of the monetary policy committee voted in relation to interest rates and will also give potential clues as to what other monetary policies the central bank may have in store. For me it is likely that the split will have been 9-0 in favour of keeping the UK’s base rate at 0.5% but any surprise results and the pound will be set for another volatile day tomorrow.

Will the pound continue to fall?

For me the pound is likely to remain on the back foot against the US dollar, however I still feel with the continuing threat of deflation in the Euro Zone, the pound will find support and return back to the levels seen in July – for this reason I would suggest the current moves represent a good opportunity if you are selling Euros.

Looking at data to watch out for and tomorrow will also see the release of euro zone construction figures at 10:00 and the FOMC minutes at 19:00. This is the US version of the Bank of England minutes and can cause a shift in dollar exchange rates dependent on the tone of the report.

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