The consumer price index is a key measure of the base inflation rate and this has come in at 1.8% in August. This is the first time consumer prices have fallen below the 2% target and is a positive indicator of retail sales in the UK. The figure was backed up by the retail price index which rose to an annual rate of -1.4%, climbing 0.2% from the previous month.

Strong sales of games, furniture and alcohol have driven the rise, as consumers take a more positive view of the economy. Bank of England governor Mervyn King has noted that inflation will likely remain volatile while the Bank continues with its QE programme. Sterling gained 0.3% against the US dollar following the news, trimming losses made yesterday in a risk averse market.

Sterling currency rates are currently at USD1.6450 and EUR1.1648.

The rates quoted above are interbank rates. Client rates may vary according to the volume and timing of the trade.