020 7898 0500Sterling set a fresh 11-month low against the US dollar yesterday, losing almost 1%, as UK inflation fell to the lowest level since October 2009. After outperforming its major trade partners throughout the first half of the year, sterling’s recent struggles against a resurgent dollar has seen many of these gains erased. Although inflation reached 1.9% year-on-year in July, a worse-than-expected figure of 1.2% last month all but eliminates the likelihood of an interest rate hike this year, and throws an increase in early 2015 into doubt. Sterling also fell steeply against the euro even though German economic sentiment had turned negative and industrial production throughout the whole Eurozone fell. Sterling seems to have very few friends at the moment.
Today we see the release of the UK jobs report, which includes average earnings over the previous three months. A stagnation in wage growth has been cited as a reason to maintain the current interest rate, and any change from expectations could either prompt support for sterling or see further sterling weakness.
