Inflation numbers weaken Sterling

This morning UK inflation came in at 2.6%, slightly less than the expected 2.7%. This might not sound like much, but it significantly decreases the chance of the Bank of England raising interest rates this year. In turn, the lower return on offer for investors mean they are seeking other places rather than the Pound to place funds, which has weakened Sterling further.

GBP/EUR has dipped into the €1.09’s again and GBP/USD is in the $1.29’s. (View live charts here).

The next key event for the Pound is tomorrow’s UK employment numbers. Analysts expect unemployment to be at 4.5% and average earnings at 1.8%. The numbers will be key, as the BoE are holding off raising rates due to the fact that wage growth is lower than inflation, which in turn is squeezing consumers. If the numbers at 09:30am tomorrow are worse than expected, then it could send the Pound lower into the low €1.09’s. If wage growth has picked up, it might give the Pound some support and send it back above the €1.10 mark again.

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