HiFX comments on sterling rise following CPI announcement

Chris Towner, director of FX advisory services at foreign currency specialists, HiFX, comments on CPI data.

“This morning we saw inflation come in at 0.1% year-on-year against wide-spread expectations of 0% which has helped buoy sterling, with GBP/USD rallying to levels above 1.5700 and GBP/EUR re-testing towards 1.4200. With commodity currencies also on the back foot as well as the Japanese yen and the recent devaluation from China, this is putting upward pressure on sterling as a trade weighted index, which is at its highest levels since 2008.

“Two things though to point out here. Firstly sterling being too strong does not help our exports, especially in the global markets where competition is intensifying. Secondly a strong currency puts downward pressure on prices and with the continued sell-off in energy prices and the slower wage growth that we have seen of late, this is hardly enough to spur the Bank of England on to raise interest rates. We may in fact end up waiting for longer.”