Commenting on today’s UK CPI data, Andy Scott, Associate Director at Chatham Financial, said: “Sterling recovered some of its early session losses following inflation data that showed consumer prices rose at a stronger than expected pace last month. The data adds weight to the argument against the Bank of England cutting interest rates, following a significant rebound in the monthly data on the economy since December’s election. While the jump higher in January’s CPI number doesn’t in itself mean an end to the two-year downtrend in the pace of inflation, there were signs of upwards pressure on future prices that will likely put an end to any discussions of an imminent rate.
“Sterling is trading close to its highest levels since the Brexit referendum result in 2016 against a number of its G10 counterparts, including the Euro, which is weakening due a recession in German manufacturing. The reduction in UK political instability and increased certainty over Brexit have driven renewed interest in the UK currency, along with an upturn in optimism over the UK economy. With the Eurozone economy bogged down by continued headwinds from the numerous challenges facing the manufacturing sector, there is a lot of potential for Sterling to gain further against the Euro in the months ahead, particularly if the Boris bounce translates into a meaningful economic rebound.”