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Pound drops to Four Month low versus the dollar and euro as Inflation slows

Pound drops to Four Month low versus the dollar as Inflation slows

US Dollar exchange rate

Later this afternoon we also have the US inflation number for July. This is forecast to ease to 2 percent from 2.1 percent in June. While the CPI is not the Feds preferred inflation measure it is closely watched.


UK inflation has fallen more than economists forecast in July, giving the Bank of England room to keep its key interest rate at a record low. The rate of price growth fell from 1.6 percent from 1.9 percent in June. Markets had expected the inflation rate to remain at 1.8 percent for the month. Sterling has since nose dived following this latest report.
While inflation is below the Bank of England’s target, it continues to outpace wage growth, squeezing consumers. The Bank of England cut its forecast for wage growth last week and Carney said the weakness is adding to uncertainty about the outlook for spare capacity and inflation.

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It is a quiet day for the euro area today and tomorrow followed by manufacturing for the region on Thursday.