Sterling continued to slide against the US dollar as the Bank of England (BoE) voiced concern over low UK inflation, while gaining a little bit of ground against the euro which weakened following testimony from European Central Bank (ECB) President, Mario Draghi.
After the BoE lowered its growth forecast last week, investors were keen to hear the thoughts of BoE Governor Carney and Chief Economist Andy Haldane. Both signalled that they were concerned over the slowdown in inflation, with Carney pointing to ‘huge disinflationary forces’ from the UK’s trade partners to confirm investor belief that that BoE is in no hurry to raise interest rates given the current global climate. Although this news initially saw sterling fall sharply, it strengthened against the euro as ECB President Draghi suggested that the planned asset buying programme could include government bonds. With the announcement of this more severe intervention, the single currency weakened across the board.
The UK data kicks the day off with consumer inflation released this morning. With inflationary pressure seen as the current hot topic when considering interest rate rises, a further decline in inflation could see sterling struggle.