Yesterday saw UK inflation figures fall in line with expectation, with year-on-year annual figures fall to the target 2%, and core inflation reduce to 3.5%. Whilst this is promising, it must be noted that key inflation metrics show services pricing inflation is still around 5.5%, and food prices about 25% higher than they were two years ago.
At midday today the BoE interest rate decision is set to take place. With consensus that rates will remain unchanged (staying at 5.25%), traders will be more focusing on the accompanying statement and voting pattern of the policy committee.
If more than two policymakers vote in favour of a rate cut, then there's a chance of some initial Pound Sterling weakness against its peers. On the other hand, Sterling could stay within its recent range if the BoE refrains from making any notable changes to its policy statement and the vote split remains the same (i.e. with seven officials voting for a hold).
As we go into the afternoon GBP/USD trades just over 1.27 on UK inflation as expected before interest rate decision.the market, having retreated from previous gains, and GBP/EUR still trading firm into the 1.18’s.
