Pound Sterling slides as UK inflation decelerates as expected
The Pound Sterling (GBP) declines sharply against its major currency peers on Wednesday, following the release of the United Kingdom (UK) Consumer Price Index (CPI) data for October.
The Office for National Statistics (ONS) has reported that the headline inflation has fallen to 3.6% year-on-year (YoY), as expected, from 3.8% in September. In the same period, the core CPI – which excludes volatile items such as food, energy, alcohol, and tobacco – has grown moderately by 3.4%, as expected, compared to the prior reading of 3.5%. On a month, the UK headline inflation rose expectedly by 0.4% after remaining flat in September.
Meanwhile, inflation in the services sector has also come down to 4.5% from 4.7% in September. Signs of price pressures cooling are expected to pave the way for an interest rate cut by the Bank of England (BoE) at its monetary policy meeting in December.
This month, BoE dovish expectations intensified after the release of the labour market data for the three months ending in September, which showed weakness in the job market.
On Tuesday, BoE policymaker Swati Dhingra stated at the University of Sheffield that she expects further disinflation in the services sector. She further argued that the central bank should push policy rates to the neutral level “fairly soon”, a state where interest rates neither restrict nor stimulate the economy.
Going forward, investors will focus on the UK Retail Sales data for October and the preliminary S&P Global Purchasing Managers' Index (PMI) data for November, which will be published on Friday.
Source: FXstreet.com
