Yesterday saw no major data releases as sterling traded on the back of the weekend warning from Bank of England (BoE) Governor Mark Carney, which cautioned that the ballooning UK housing market poses a risk to the economic recovery. This initially brought an initial surge in sterling through the morning against both the euro and US dollar, but was to be short-lived as sterling weakened throughout the afternoon. This was based on the belief that the BoE is unlikely to use an interest rate hike to combat inflation in the housing market.
Today sees the release of inflation data from the past month. A slight increase is expected and therefore if it comes in weaker than expected it could be seen as an indicator that UK interest rates are set to remain at record lows for the foreseeable future, thus weakening sterling.
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