The latest inflation data from the UK has come in slightly lower than expected, with a 2.6% year-on-year rise in CPI. Whilst this is below both the consensus estimate and prior reading it still far exceeds the Bank of England’s 2% threshold. Furthermore, with the most recent wage data indicating a 2% rise in annualised terms, real earnings remain squeezed. The reaction in GBP has been a swift drop of around 50 pips against the US dollar, after the cross printed a 9 month high earlier this morning, albeit more due to weakness in the buck rather than broad sterling strength.
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