Sterling rallies as inflation falls to 2%

Sterling had a strong day yesterday despite data from the Consumer Price Index (CPI) revealing that inflation had  fallen to the Bank of England’s (BoE) target of 2% for the first time in over four years. In theory this should lower the likelihood of the BoE raising interest rates in the near future and thereby weaken the pound; however, investors seemingly ignored this fact and sterling was buoyed due to the increased optimism that the UK’s economy will continue to strengthen. Furthermore, analysts believe that the overall unemployment level will continue to fall which will increase pressure on the central bank to increase interest rates sooner rather than later. As such, sterling made gains against the euro for the first day in four, while simultaneously rising against the US dollar.  Today, there is no major economic data from the UK due, with a speech from the Governor of the BoE likely to be the most significant event of the day, especially in the wake of yesterday’s inflation figures. Call your trader now for the latest sterling rates, as data continues to impress.