UK inflation falls
The UK consumer price index released this morning rose 0.4% on the month to August and is currently running at an annual rate of 1.6%. Retail prices rose 0.5% and are currently down -1.3% on this time last year. Lower food and energy prices have fuelled the drop in UK inflation, and this is expected to keep sterling currency rates under pressure until the end of 2009.
The recent Bank of England inflation report shows inflation is expected to fall as low as 1% in the late autumn while economists are predicting the trough could be around 1.3% or 1.4%. As unemployment rises and retail spending remains low, the Bank of England is committed to fighting deflation, although firm oil prices have kept the threat of this at bay.
Sterling exchange rates were little changed following the announcement and the pound is currently trading lower ahead of US retail sales released this afternoon. The pound is currently valued at USD1.6468 and EUR1.1277.
The rates quoted above are interbank rates. Client rates may vary according to the volume and timing of the trade.