Slow Day for Sterling
It was a fairly uneventful day for sterling crosses, despite CPI data from both the UK and the States. At the time of writing, both GBP/USD and GBP/EUR had moved by less than 0.3% over the course of the day.
UK CPI numbers released this morning came in slightly softer than expected, at 1.5% against a forecast of 1.6%, the weakest inflation numbers in three years. The slower pace of price increases was attributed to a cap on electricity, gas and other fuels. As wage growth is now outstripping inflation, household spending could be boosted as a result. Office for National Statistics data released last Wednesday showed a 3.6% increase in average earnings in the three months to September.
Although the weak inflation numbers could prove to be a positive thing for British households, it also fuels speculation that the Bank of England will soon have to cut interest rates, which would usually weaken the pound as a result. The UK central bank are poised to begin loosening monetary policy if Brexit uncertainty continues to weigh on British economic output. In fact, two of the nine members of the Monetary Policy Committee voted in favour of a rate cut last Thursday.
At the time of writing, GBP/EUR is trading in the mid-16’s and GBP/USD is trading in the mid-1.28’s.