Sterling slipped on Tuesday, falling against both the euro and US dollar, despite UK inflation rising to a 12-month high of 0.3%. An increase in UK inflation had been largely priced into the markets ahead of today’s release, and the lack of market movement in response to the data release stands testament to how positive economic data can still leave investors unmoved. Instead, with attention still very much focused on the risks posed by a UK exit from the European Union, sterling fell towards multi-month lows against the US dollar and the euro.
The release of average earnings figures from the UK today could provide some signs of optimism for sterling should we see a greater-than-expected rise. However, should this data disappoint, we could see recent multi-year lows for sterling tested especially as we move ever closer to a decision on when the EU referendum will take place.