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British Pound Drops Against US Dollar on Weak Inflation Data

July 18, 2017 at 15:25 by Simon Mugo

Focus on 5-pound noteThe British pound today dropped sharply against the US dollar after the release of weak inflation figures by the Office for National Statistics. The major decline in the sterling highlighted the fact that that the currency was extremely susceptible to monetary policy speculation.  The weak inflation figures also signaled that a rate hike by the Bank of England might not be forthcoming this year.

The GBP/USD currency pair lost over 100 points at the height of its decline as investors reacted to the disappointing UK inflation figures.

The UK consumer price index (CPI) for June released by the Office for National Statistics came in at 2.6% on an annualized basis, which was lower than the market consensus of a 2.9% increase. The sterling’s drastic decline was unexpected as the CPI print had exceeded the BoE’s target of 2% inflation. The release of the positive UK House Price Index for May, which was recorded at an annualized figure of 4.7% exceeding market expectations of a 3.0% increase, could not rescue the pound from its decline.

The GBP/USD had opened today’s session by rallying to a 9-month high of 1.3126 before the sudden drop. The rally was largely attributed to weakness in the US dollar rather than the pound’s strength. The BoE Governor, Mark Carney also unveiled the new £10 note today.

The currency pair is likely to be affected by the release of the US housing and building permits data slated for tomorrow.

The GBP/USD was trading at 1.3030 as at 15:19 GMT having recovered slightly from a low of 1.3003. The GBP/JPY was trading at 145.78 having dropped from a high of 147.32 earlier today.

If you have any questions, comments, or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.

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