Sterling moved to a further three-month high against the euro on Tuesday following a better-than-expected inflation report from the UK. A positive start to the day also saw sterling reverse losses seen against the US dollar on Monday as inflation figures were released for the UK. Although a contraction of 0.1% was evident throughout October, when volatile prices such as food and energy are stripped away, inflation stood above expectations at 1.1%. This represents the highest growth in core inflation for three months – and together with the greatest level of housing inflation since May, this meant that sterling was supported across the market. With little economic data released from elsewhere, sterling movements were relatively subdued throughout the rest of the day.
Today sees attention shift to the US, where building permit data released in the afternoon will set the scene for this evening’s release of minutes from the last Federal Open Market Committee meeting. With December being mooted as the month when US interest rates will finally be increased, these minutes will be very carefully scrutinized are likely to impact the currency markets.