After hitting five-and-a-half year highs against the US dollar earlier this month, Monday saw sterling slip to its lowest levels since the end of June, with no major economic data releases to support the currency. As such, yesterday’s decline appears to be attributable to investors starting to unwind some of their long-held positions. Some analysts are suggesting that sterling may have risen above its fair value, particularly following disappointing manufacturing figures last week.
Today sees the release of inflation data from the UK, which is expected to have increased slightly to 1.6%. Testimony from Bank of England (BoE) Governor Mark Carney follows later in the morning, and is likely to focus on the bank’s measures to maintain financial stability. Any further hints as to when we could see interest rates rise in the UK will likely case a reaction for sterling in the markets, especially in light of the recent string of disappointing data released in the UK.