HiFX comments on the UK inflation data
Andy Scott, associate director of FX advisory services at foreign currency specialists, HiFX, comments on the UK inflation data.
“The pound came under renewed pressure against the euro on Tuesday, following a fall in inflation to zero last month. Having hit 1.4250 two weeks previous, its highest level in over seven years, the pound has since dropped back by 4.5% to 1.3600 today.
“The Bank of England warning on inflation turning negative this year and the chief economist highlighting the BOE could still ease policy in order to return inflation to its 2% target has weighed on the pound. A pickup in euro zone data has also seen the euro regaining some ground.
“This clearly isn’t an environment that warrants a rate hike and unless wage growth picks up sharply from its currently rate of 1.8%, the few hawks on the MPC are going to have a very difficult job in convincing the majority that a rate hike is necessary this year. Regardless of there being only a very slim chance of a U.K. rate hike this year, we expect sterling to remain strong against the euro and to recover against the dollar in the months ahead.”
