Good morning. Sterling has fallen slightly today ahead of the key EU Brexit meeting that starts today. The reason however was due to old fashioned economic data. UK inflation numbers were released this morning, coming in quite a bit below forecast. We were expecting a reading of +2.8% however the actual result was +2.4%.
The lower inflation reading means there is now less chance of the Bank of England (BoE) raising interest rates. This in turn has weakened the Pound slightly. This is because when interest rates are expected to rise, so does the currency concerned due to the higher return on offer for investors. Conversely when an interest rate rise is less likely, it weakens the currency, which is what has happened this morning.
Elsewhere, EU data came in slightly mixed but their inflation numbers were largely as expected. All eyes are now on the EU summit which runs today and tomorrow. You can read my detailed post from yesterday with regards to what effect this might have on exchange rates. Personally I think the next 24 hours are very important for Sterling exchange rates and those that need to convert currency.
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