Forex »

Sterling Tumbles as UK inflation Falls to Lowest Level in 4 Years

Finances
Share on StockTwits
Published on
www.finances.com
Sterling Tumbles as UK inflation Falls to Lowest Level in 4 Years

The British pound tumbled to fresh lows as UK inflation fell to the lowest level in four years, official government data showed.

The UK’s annual rate of consumer inflation increased 2.1 percent in November, down from 2.2 percent the previous month. This reflected the slowest rise since November 2009. Core consumer inflation, which excludes volatile elements such as food and energy, rose at an annual rate of 1.8 percent, higher than the previous month’s 1.7 percent gain.

“Slightly softer-than-expected CPI inflation plays negative for sterling,” said Paul Robson of Royal Bank of Scotland Group Plc. “This gives the Bank of England more room to keep inflation low.”

Sterling fell for the fifth consecutive day against the US dollar, sending the GBPUSD pair to 1.6275, a loss of 23 pips. The pair tumbled to a session low of 1.6225, the lowest level since November 27. Consumer inflation in the United States was also softer than forecasted, accelerating at an annual rate of 1.2 percent in November. The British pound has weakened more than half a percent against the greenback in the past five sessions.

The pound dropped to its lowest level in six weeks versus the euro amid mostly in-line CPI data from the Eurozone. Euro area consumer inflation rose at an annual rate of 0.9 percent in November, up from the four-year low of 0.7 percent. The euro edged up 14 pips to 0.8458 GBP. The euro has gained more than half a percent against the pound in the last five sessions.

The Bank of England has pledged to keep interest rates at record lows so long as unemployment is above 7 percent, subject to inflation falling within the central bank’s target of 2 percent. Testifying in front of the House of Lords Economic Affairs Committee, BOE Governor Mark Carney was confident inflation would reach target levels, and that central bank guidance was working well.

Share on StockTwits