Positive inflation data from the UK yesterday saw sterling push higher against both the euro and US dollar, as consumer prices picked up throughout May. With the spectre of deflation hanging over the UK in recent months, and a slip into negative territory in April, today’s confirmation that the inflation rate has risen back above zero has allowed sterling to take advantage of poor economic data from elsewhere. Although the inflation rate continues to remain far below the Bank of England’s target of 2.0%, inflation is forecast to pick up pace significantly towards the end of the year. Following disappointing economic sentiment data from Germany, sterling extended its gains against the euro to finish the day significantly higher against the single area currency.
Today sees release of minutes from the latest meeting of the Bank of England’s policy committee. This document will give a key insight into the central bank’s future monetary policy, and could affect markets significantly. Alongside this, we will see monthly UK labour data released, where another strong increase in average earnings could see sterling push higher still.