Will today’s inflation data hinder sterling’s good start to the week?

A positive start to the week saw sterling move higher against both the euro and US dollar as further uncertainty over the situation in Greece saw the UK currency benefit. Sterling also strengthened against the commodity backed currencies as Chinese import data disappointed falling 12.7% which had an immediate impact as China is a key buyer of commodities.

Today sees confirmation of the rate of UK inflation rate for March and for the year to the end of March. With inflation at 0% for February, and the same forecast again, sterling investors will be hoping, firstly, that it will not turn negative and then, secondly, it shows an uptick from February’s figure. Although the reasons for low inflation are outside the UK’s control due to the wholesale fall in international energy prices, sterling could suffer if it falls further or it continues to be low for too long. The Government, of whatever hue, will also be keen as inflation also depreciates the effective value of its debt!