The City sold off the pound on Monday as soft inflation figures again gave the Bank of England room to wait before raising interest rates.
Sterling fell by a cent to a four-month low of $1.6634 against the dollar and dropped 0.6 cents to €1.2463 against the euro following June’s official Consumer Prices Index, which dropped from 1.9 per cent to a lower-than-expected 1.6 per cent in July.
The data mark the seventh month in a row that the Bank of England’s cost of living benchmark has been below its 2 per cent target. Later sales on the high street than last year were largely behind the fall, although a bitter price war between the UK’s biggest supermarkets pushed food prices down 0.6 per cent year on year. Weak growth in pay packets also puts Threadneedle Street under little pressure to act.
ING Bank’s James Knightley said: “This further eases the pressure on the Bank to consider near-term interest rate rises and pushes the balance more in favour of a delay to rate hikes.”