Forex Flash: GBP/USD sell on rallies – Rabobank (Barcelona) - The sterling continues to retrace early gains, as a firmer dollar is weighting on riskier assets. After today’s peak in the proximites of 1.5915 on solid inflation data in the UK during October, the pound has been sliding back towards the actual levels around 1.5875/80

Ahead of the BoE’s Quarterly Inflation Report due tomorrow, Jane Foley at Rabobank comments that this inflation figures were not the result of a more solid demand, but of higher costs. “This type of inflation is akin to higher taxes insofar as it leaves consumers will less money for other products and reduces demand which undermines growth. Note that most of the time the BoE has been implementing QE, UK inflation has been above the 2% inflation target. Given that the BoE are aware of the poor EZ economic data and the fact that UK austerity is due to be stepped up next year, the is good reason for the BoE to talk about downside risks to the economy in the Inflation report tomorrow. We would favour selling GBP rallies”.