Sterling Dips Amid Softer-than-Expected UK Consumer Price Inflation

Sterling fell after UK consumer price inflation data came in lower than expected, reinforcing the outlook for BoE interest rate cuts. The pound declined 0.3% against the dollar, marking its first fall in five sessions. Euro/sterling rose 0.3%. Inflation figures showed a rise to 2.2%, missing forecasts.

Sterling took a hit on Wednesday as a softer-than-expected UK consumer price inflation reading bolstered expectations for further interest rate cuts from the Bank of England this year. The pound dipped by 0.3%, landing at $1.2824, and marking its first decline in five sessions against the dollar. Meanwhile, euro/sterling gained momentum, advancing 0.3% to 85.70 pence.

Official statistics indicated that consumer price inflation in the UK rose to 2.2% in July after holding at the Bank of England's 2% target for two months. However, this fell short of economists' projections of a 2.3% annual increase. Services price inflation also eased, dropping to 5.2% in July from 5.7% in June, down from the 5.5% anticipated by a Reuters poll, and marking the lowest rate since June 2022.

Traders are now pricing in 45.61 basis points in rate cuts from the Bank of England this year, compared to 44.6 basis points anticipated on Tuesday.

(With inputs from agencies.)