What does the CPI data mean for sterling?
Chris Towner, chief economist at HiFX comments on this morning’s CPI data, said: “Sterling fell by 1% against the dollar and the euro this morning, reaching its lowest level against the euro since May as figures showed headline inflation turned negative again last month. The continued lack of price pressures is great news for consumers who are being treated to an early Christmas present with a combination of good deflation amid higher wage pressures. We are continuing to enjoy low energy and food prices which makes a rate hike from the Bank of England harder to justify.
“Sterling continues to look a little vulnerable against the ‘comeback’ euro and having breached 1.3450, looks set for a test back below 1.30 in the months ahead. Last week, news that the trade deficit had grown to over £11bn in August demonstrates that we are still importing too much and exporting too little. One of the big influencers on trade is the value of the domestic currency and the fact that sterling is now dealing 10 cents lower against the euro than in July, will come as a welcome relief to the exporters.”