Better-than-expected inflation data from the UK gave sterling a small boost yesterday morning, although positive data from the US and the Eurozone soon reversed these gains. Inflation in the UK was forecast to rise by 1.2% compared to this time last year, but an increase of 1.3% beat expectations and saw sterling benefit. This had a muted impact however, with much of the increase attributed to the run-up to Christmas and lingering fears over disinflationary pressures from the Eurozone and later in the day sterling fell to a fresh one month low against the euro. Sterling traded largely sideways against the dollar.
Today sees the release of minutes from the latest meeting of the Monetary Policy Committee (MPC). With interest rates remaining at 0.5% this month, this is likely to have a muted impact, although any change in the voting spread from last month’s 7 to 2 vote could result in significant market movement.