UK Inflation at 3% – what can we expect for the pound?

This mornings UK inflation figures, released at 09:30, came out at the 3% level analysts were expecting. As a result sterling has actually fallen a fraction on this mornings trading as a fall in inflation eases the pressure slightly on the Bank of England.

What is likely to impact sterling?

Inflation is an area that the Bank of England will be keeping a close eye on and a fall from last months levels of 3.1% will be a slight relief for the central bank, although the Bank of England Governor Mark Carney will still need to write a letter to the Chancellor Phillip Hammond explaining why inflation is 1% ahead of the Banks target level.

The main focus for anyone buying or selling sterling still needs to be the impact of the next round of Brexit negotiations. GBP/EUR in its current range is actually doing very little, suggesting the market is playing a waiting game. If you look at the recent moves for EUR/USD historically a significant drive in favour of the Euro for this pairing would also create a significant move in EUR/GBP but this time around it is actually having very little impact with levels sitting between 0.90 and 0.87 which is a very tight and small range. This has been the case for the last three months and something that I believe will continue until the next round of Brexit negotiations are complete.

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