It has been a reasonably quiet session for major currencies. Notably, Sterling has been broadly flat for the second day running despite the release of weak UK inflation data and markets further bumping up their pricing of Bankof England rate cuts.
CPI-inflation fell to a 3-year low in December, according to data out this morning, with core CPI-inflation falling to 1.4% yoy from 1.7% yoy in November and headline CPI-inflation falling to 1.3% yoy (from 1.5% yoy). Both measures were materially below the Bank of England’s 2% target and markets are now pricing a 60% probability of a 25bp cut at the 30th January policy meeting and a full 25bp rate cut by May. However, Sterling has traded sideways today with GBP/USD hovering above the 1.30 mark.
Markets are now likely to turn their attention to UK retail sales data for December (out Friday), November labour figures (21 January) and perhaps more importantly the flash estimate of the UK composite PMI for January (24 January).
